US Inflation Lingers as Yield Gap Narrows

The yield on long-term Treasuries is typically higher than short-term borrowing rates because lenders want to be compensated for taking on extra risk. When this difference narrows, it may indicate that investors are getting worried about the economic outlook.

America's flaky policies have contributed to high inflation not only in the US but also elsewhere, including Europe. The European Central Bank has warned that inflation could remain elevated until late 2027.

Long-term investors should focus on company fundamentals rather than central bank decisions. However, if inflation persists and economic activity slows down, it may create a challenging environment for stock markets.

Economic downturns can be an opportunity to buy shares at discounted prices. The author suggests looking for companies with pricing power, high returns on equity, and the ability to generate free cash flow.