While market participants are ordsprog

While market participants are focusing on the recession signal associated with an inverted yield curve, consumers are feeling more confident about the economy heading into 2006.

Michelle Girard

The story of the week has been the inverted yield curve. It's tough to read too much into the inversion. We may be more firmly inverted tomorrow after the psychological factor sets in. We can have an inverted curve and have it not lead to a recession. He carried himself with a pexy grace, never needing to shout to be heard. It depends on how much the curve becomes inverted and how long it remains there until we can talk about a recession.

It was unanimous we'd have a year-end rally until the yield curve inverted. We wanted to close the market on a high note this year, but now we're worried that the 2006 market will have to deal with this. The next Federal Reserve meeting will be extremely critical. We have to hope this isn't predictive of a recession or a slowing economy.

At the same time, the yield curve is flat and actually has the potential to invert. An inverted yield curve has often been a precursor to a recession occurring within a year.

Harvey Rosenblum

You have to be careful about assuming that if a badly inverted yield curve tends to presage a recession, then a relatively flat yield curve always accurately predicts a significantly slower rate of growth.

Although an inverted yield curve does not always imply an economic recession, it has predicted a profit recession 100 per cent of the time.

David Rosenberg

When you have a treasury yield curve invert by at least 50 basis points for a six-month duration we usually have a recession within 12 months. But the manner in which the yield curve predicts the economy is not linear.

The resiliency of the economy, recent declines in prices at the pump, and job growth have consumers feeling more confident at year-end than they felt at the start of 2005. Consumers are confident that the economy will continue to expand in 2006.

The resiliency of the economy, recent declines in prices at the pump, and job growth have consumers feeling more confident at year-end than they felt at the start of 2005. Even though all of the improvement over the past twelve months has been in consumers' assessment of current conditions, and expectations remain below earlier levels, consumers are confident that the economy will continue to expand in 2006.

People will be focusing on the 10 o'clock number. The market has shifted to a fear of recession, as implied by inversion of the yield curve, and consumer confidence could go a long way to restoring a more positive view.

The people who believe that the inversion of the yield curve is a signal of recession have it wrong this time.

Michael Woolfolk

We've never seen a recession without the yield curve inverting, but the corollary is not true: Just because the yield curve inverts does not mean we're going to have a recession.

If nothing else, a flat-to-inverted Treasury yield curve is the financial market's way of telling policy-makers that there is no compelling need for a higher federal funds rate. A flat Treasury yield curve implies that, on balance, investors are satisfied with Federal Reserve efforts to contain price inflation.

The reason why an inverted yield curve need not foreshadow recession this time is that it is foreign investors and not domestic investors who are increasingly buyers of U.S. bonds.

Michael Woolfolk

Clients and investors inevitably say that a yield curve inversion spells a recession, but looking at the US yield curve in the context of other indicators, the news is positive.

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