The impact of a normal yield curve

Steve Sosnick, Interactive Brokers’ Chief Strategist, discusses the yield curve returning to its normal shape.

The yield curve is a plot line of short- and long-term interest rates.

Earlier this year, a flat yield curve signaled investor pessimism about the future. An inverted yield curve, in which long-term rates dip lower than short-term rates, also occurred. It has been deadly accurate in predicting economic downturns.

Now the yield curve is back in a normal range. Will this result in better growth prospects or have any negative effects on stock and bonds?

Photo Credit: Milena Mihaylova via Flickr Creative Commons