After almost two years of inversion, the yield curve has returned to its normal upward-sloping shape. This has important implications for bond investors and for the economic outlook. Back in April 2023, two-year Treasury Note yields were about 100 basis points (bps) above 10-year yields. Now they are about 10 bps below. There are a few reasons for this change, and they point to an upcoming move toward a steeper upward-sloping curve in the next few quarters. First of all, U.S. economic trends have been positive in recent quarters. Fixed-income investors have moved away from fears of deflation and are now once again seeking a premium in yields versus inflation. That has lifted rates at the long end of the yield curve. Second, the Fed is finally in front of inflation and can afford to lower rates. The central bank has built a wide cushion between fed funds and core PCE in order to push inflation back toward 2.0%. This is all well and good, but if the Fed's gap is too wide for too long (we think a 150 bps gap is desirable, versus the current gap of 230-250), the central bank risks tipping the economy into a recession. The Fed is now trying to reduce that gap, without letting inflation rekindle, and lowered the fed funds rate by 50 bps at its September meeting. We think that a second cut is coming in November and a third prior to year-end. We then look for two more cuts in 1H25, bringing the fed funds to the 3.5% range. Assuming lower rates keep the economy in a growth gear, longer-term rates should remain stable and the yield curve should continue to slope upward.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Applied Materials Inc. (AMAT); TJX Companies, Inc. (TJX); GE HealthCare Technologies Inc (GEHC); Campbell Soup Co. (CPB) and the Focus List deletions are Dominos Pizza Inc (DPZ); Labcorp Holdings Inc. (LH); Mondelez International Inc. (MDLZ); Oracle Corp. (ORCL).

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.