Fixed income investors experienced three different market environments in the third quarter: a period of relative calm in July, several flight-to-safety events in August, and a resumption of risk taking in September as August risks faded. The net result during the quarter was little movement in longer-term interest rates and a flattening of the yield curve, leading to positive returns for all major segments of fixed income. Short-term rates were pressed higher by the Federal Reserve’s (Fed) commitment to a continuation of gradual rate hikes and monetary policy normalization [Figure 1].

Much like the first half of the year,

For most people, thinking about the economy starts with their personal financial situation. While job prospects, or the health of a business, or prices at the pump all have an impact on how we feel about the economy, the bottom line is really, “How is my family doing?” In order to capture this perspective, LPL Research designed an alternative way for investors to think about markets and the economy, which we refer to as the Life Portfolio. The Life Portfolio provides a snapshot of the U.S. economy from the perspective of a typical American household. And while we use it to look at the bigger picture, it may also provide important

… and for how long?

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Organization will help you, your advisors...

Recent Treasury yield curve flattening may be a warning sign from fixed income markets, but there are also arguments to suggest otherwise. Historically, an inverting yield curve has been a solid leading indicator of recessions. However, the yield curve’s recent behavior is seemingly incongruous with that of equity markets, which have continued to hit record highs throughout the year. Although the yield curve may be implying a slower growth environment than equity markets are signaling, the curve is still a long way from inverting.

Continued Flattening…

Year to date, the Treasury yield curve has flattened considera