The Investor Notebook

23 Oct 2024

Yield Curve normalisation

-Worth noting a stirring across otherwise sedate fixed interest desks, following last week’s yield curve normalisation. Not the whole curve, rather the closely watched 10 year-2 year section of the US Treasury yield curve.

-The return-to-positive or ‘disinversion’ is significant given it had been ~ 550 days since this spread was last positive and the longest running inversion in over 50 years

– In an excellent Goldman Sachs Portfolio Strategy Research piece released earlier this year, the team debunked the significance this might play (ie whether the curve is bull or bear steepening) in divining the outlook for equities. Moreover, GS declaimed ‘Growth (economic), rather than changes in yields or the shape of the curve, is the most important driver for equity returns’

– Another case where the principles of Occam’s Razor hold true for stock investing.

Ben Griffiths​

Executive Chairman

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