Daily Market Color

Yield Curve Steepens as 2019 Comes to a Close


Yield curve reaches steepest level since 2018.. The spread between 2-year and 10-year Treasury yields (an oft-cited indicator of recession when inverted) has widened out to nearly 35 basis points – the steepest level since 2018. While the curve remains relatively flat, many hope the re-steepening of the curve is a sign the Fed’s “insurance” rate cuts have successfully steered the economy through a global growth scare. Looking ahead to 2020, consensus is that the Fed will leave rates unchanged, but that could change quickly as new Fed voters rotate onto the FOMC and as the US and China begin to negotiate a more substantive “Phase Two” trade deal.


Equity markets end 2019 with strongest year of the decade. All of the major US equity indices hit new records in 2019, The S&P 500 climbing nearly 29% while the Nasdaq climbed 30%. Much of those gains came later in the year after the Fed’s three rate cuts took hold and after the US and China reached a “phase one” deal designed to de-escalate the trade war between the world’s largest two economies. Gains in equity markets weren’t isolated to the US, the FTSE All World Index climbed nearly 24% since the start of 2019, the best year it’s had since 2009.


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