AIVL - Weekly Market Pulse: What Yield Curve Inversion

• Does the yield curve inversion cause a recession or does it just provide a signal? Is the inversion only about expected future monetary policy? Do other factors also influence the shape of the curve, and if so, can we disentangle the various factors?
• There is a lot that we don’t know about the signal in the best of times, and today’s environment is far from that. Things really are different this time.
• The dollar is responding to higher real rates and hit 100 last week for the first time since the onset of COVID in early 2020. It is, for now, still within the range of the last 7 years, but we may be in a new primary uptrend.

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