Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher shares his thoughts on yield curves (the difference between short- and long-term interest rates), which investors use as a rough proxy to assess financial credit conditions. According to Ken, the 10-year to 3-month US yield curve has historically been a reliable leading economic indicator. However, given today’s global banking system is more interconnected than ever, Ken suggests the global yield curve is a better indicator of broad economic conditions.

With the recent flattening of the US yield curve, many investors and pundits fear an inverted yield curve (when short-term rates exceed long-term rates) might signal impending economic recession. However, Ken believes today’s globalized banking system means one country’s yield curve only tells a small part of the economic story since money can be lent across the globe in near instant transactions. While the global yield curve has narrowed this year, it has remained positive—indicating an overall healthy lending environment, which is a driver of continued economic growth. The fear of a flatter US curve, therefore, may be misplaced.

For more of Ken Fisher and Fisher Investments’ thoughts on the markets, visit us at https://www.fisherinvestments.com/en-us.

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