The recent inversion of the US yield curve has generated renewed angst about the health of the US economy. Our view on this is unchanged from the comments we provided in the July edition of Quarterly Strategic Outlook; quantitative easing has collapsed the term premium, which is artificially suppressing longer dated bond yields and artificially flattening the yield curve. We think the US economy is fundamentally sound. However, there are risks and we are not completely dismissing the messages from the bond market.

Latest data out of the US supports the story that the trade war with China is having a negative impact on trade and the goods-producing sectors of the economy, while at the same time the tight labour market that is generating albeit modest wage growth is underpinning solid household consumption.

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