Yield Curve Is Steep - Which Means It's a Good Time to Invest

by: Toro

When the yield curve is this steep, it is usually a good time to invest in stocks.



Because a steep yield curve usually indicates an increase in future economic activity.

It may be that the steepness is a reflection of inflationary fears. It may also simply be overwhelming supply. Or, more likely, it is a combination of all three.

However, I would not bet against history. A steep yield curve is good for the financial system, which can repair itself by feasting on risk-free fat long yields while paying their depositors nothing. This re-liquefies the banks which can then start lending again, or at least cushion the blow from rising defaults.

For the record, I am less invested than I was a month ago but I still have significant equity exposure.