Economic growth in the Eurozone has slumped. Germany has even slipped into recession territory and yields are still extremely low, or even negative. Nevertheless, there is a noticeable absence of fiscal policy stimulus. Some countries aren’t really in a position to, but others are simply unwilling. In 2018 economic growth in the Eurozone came in at 1.8%. This year, the figure is just above 1% and next year it is unlikely to even reach that. In short, the Eurozone economy could really use a boost – mainly from governments. But will that actually happen? Given the mass ‘disobedience’ of various ECB members – following the central bank’s decision to introduce yet another round of quantitative easing, but without an explicit end date this time – little can… [Read More...]

The US yield curve has (almost) inverted, and this has been making headlines for the last couple of months now. This should come as no surprise, as the yield curve is perhaps the most reliable recession indicator out there. But what does an inverted yield curve tell us about future returns? Our analysis shows that while asset class returns in general are somewhat subdued between the first date on which the yield curve inverts and the start of the recession, the inversion of the yield curve is not followed by extraordinary deviations in returns. Definition Before moving over to the results of our analysis, we would like to dwell briefly on the definition of the yield curve, and the combination of maturities in particular. In most empirical … [Read More...]