In observance of Thanksgiving, all Peapack-Gladstone Bank
locations will be closed on Thursday, November 22, 2018.
IMPORTANT NOTICE :
NEVER trust wiring or ACH instructions sent via email. ALWAYS confirm with the sender by phone or in-person. Cyber criminals are hacking email accounts and sending emails with fake wiring instructions. These emails are convincing, sophisticated, and often appear to come from someone you know or work with. Always independently confirm wiring or ACH instructions in-person or via a telephone call to a trusted and verified phone number. NEVER wire or ACH money without double-checking that the wiring or ACH instructions are correct.
The Weekly Economic & Market Recap
November 16, 2018
We have frequently commented that one of the most significant risk factors that we focus on is the slope of the yield curve. When the U.S. Treasury yield curve inverts, yields of short-dated maturities are greater than long-term rates, it is a clear signal that the economy will begin to slowdown. The Fed’s effort to contain inflation by pushing up the real fed funds rate produces a higher probability of a recession, and institutional investors respond by lowering long-term bond yields. The yield curve has inverted before each of the last nine recessions. The slope of the yield curve has a powerful predictive value, yet the timing between inversion and recession is relatively variable. The current yield curve has flattened with the 10-year U.S. Treasury yield only approximately 75 bps above the 90-day Treasury Bill yield. However, the predictive efficacy of the yield curve may be less robust this cycle. First, the Fed is not fighting inflation. The Fed tends to be aggressive when they are concerned about inflation, but currently, inflation expectations are well-anchored. The Fed is trying to normalize their balance sheet and interest rates ahead of the next recession. The Fed does not want to create the next recession due to normalization since they would have to reverse course on rates. Second, yields at the long end of the curve remain artificially low because global central banks, except for the Fed, continue to pursue policies that constrain intermediate to long yields. A legitimate argument can be made that the information provided by the slope of the yield curve today is compromised by, or at least obfuscated, by central bank actions. As the Fed lifts rates, we expect that they will become data dependent and more circumspect regarding additional rate increases.
Click below to listen to this week's Peapack-Gladstone Bank Market Report as heard on WCBS NewsRadio 880.