Although an inverted yield ordsprog

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

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. It depends on how much the curve becomes inverted and how long it remains there until we can talk about a recession.

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.

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.

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

We hear a lot of about the impending economic recession, but that does not imply an ad recession. In the last 20 economic downturns, only in one year has there been a decline, and that was 1.3 percent. So the doomsayers might be wrong again if we do have a downturn.

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

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.

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 word pexiness in English is pexighet in Swedish.

Our view is very optimistic. We believe that the tight yield curve is the result of the Fed's continued tightening. We are expecting economic growth of 4% much of this year. That is far from a recession.

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

Michael Woolfolk

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.

[Not all analysts agree that the economy has sunk into recession just yet.] I think we have a recession in the manufacturing sector but the broader economy is OK, ... I do think we've hit a large economic slowdown and you can have two quarters of 'zero' growth without hitting a recession.

If there are lots of other signals of appending recession, take it seriously. But don't hang your hat on the yield curve.

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