Managing through economic cycles

Uncertainty about the direction and timing of economic growth can lead to interest rate volatility. All financial institutions face greater uncertainty as the economy transitions from one stage to the next. Often, uncertainty creates opportunity if we can make sensible decisions. Economic cycles are the primary driver of yield curve changes, and recent activity has delivered many challenges.

We closely monitor economic indicators such as GDP growth, employment, personal spending, and inflation in order to provide sound advice. We also consider the unique needs and risk profile of each client. Read on for a deeper understanding of where we are in the current economic cycle, why considering economic cycles is important, and how we can use this information to make informed decisions.

Importance of economic cycles

Many factors can influence yields and the slope and shape of the yield curve. At a basic level, the economic cycle is perhaps the most important factor which drives yields up or down. That’s because the Federal Reserve and bond investors will react based on economic indicators and their growth or recession expectations.

The economy fluctuates in unexpected ways. Some trends may indicate strength while others indicate weakness. A successful strategy often depends on understanding current economic conditions, changes over time, and the potential impact.

 

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