Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

This past week we said goodbye the Queen of Soul, Aretha Franklin. While “Respect” may be her most famous song, my personal favorite was her cover of Simon & Garfunkel’s “Bridge over Troubled Water”. I highly recommend if you haven’t listened to that song recently, to do so and enjoy the soulfulness of her performance.

In the fixed income landscape this past week, we saw the treasury yield curve narrow to its flattest level since August 2007, as the difference between the 2-year and 10-year U.S. treasury yield dropped to 0.24%. As we’ve noted before, an inverted yield curve typically signals an eminent recession, having correctly predicted the last seven recessions since 1968. Time to sell all risk assets? While the yield curve hasn’t yet inverted, historically when it does, on average stocks rise another 15-16% in the 18 months after inversion and with stocks peaking in valuations six months post-inversion.

Central bankers will be the focus for the week ahead as the Kansas City Fed hosts their annual central bank symposium at Jackson Hole, Wyoming. This year’s timely topic is “Changing Market Structure and Implications for Money Policy”. 45x central bankers, 25x Federal Reserve System representatives, 24x academics, 12x media members, 8x financial organization representatives, and 5x government officials will partake in this year’s symposium. Fed Chair Jerome Powell is scheduled to speak on Friday and investors will be looking for any potential hints on how many Fed hikes there will be in 2019. With the yield curve potentially further flattening out, we could see the Fed accelerate to four hikes in 2019. One can argue that Central Bankers helped amplify the Great Central Recession, but in times of extreme volatility, they are the bridge over troubled water for investors.

Bridge over Troubled Water - Simon & Garfunkel

When you're weary, feeling small
When tears are in your eyes, I'll dry them all (all)
I'm on your side, oh, when times get rough
And friends just can't be found
Like a bridge over troubled water
I will lay me down
Like a bridge over troubled water
I will lay me down
When you're down and out
When you're on the street
When evening falls so hard
I will comfort you (ooo)
I'll take your part, oh, when darkness comes
And pain is all around
Like a bridge over troubled water
I will lay me down
Like a bridge over troubled water
I will lay me down
Sail on silver girl
Sail…

Data deck for August 18-August 24: