(Bloomberg) -- Guggenheim Partners' Scott Minerd has his eye on the yield curve and says it's not looking good.
“If you look at the historical path that we've been on, we are just around the point where we would be, let's say, maybe 22 months away from a recession,” Minerd, chief investment officer of Guggenheim, said Wednesday at an insurance-industry conference held by S&P Global Ratings in New York. “That should be a red flag for people because if the Federal Reserve stays on its current course, it's very likely that the curve is going to continue to flatten.”
The yield curve has been generally flattening as short-term rates rise faster than long-term rates. It's starting to approach levels that some analysts and strategists have said could worry policy makers because historically an inversion indicates a looming recession. The path of the U.S. curve is one of the greatest predictors of the credit cycle, Minerd said.
Minerd, whose unit oversaw about $246 billion as of March 31, said he's adjusted by upgrading the quality of the investment portfolio. His comments on the curve were echoed by fellow panelist Blackstone Group LP's Tony James.
“It's definitely a concern,” James said, adding that Blackstone tends to stress-test its portfolio companies for a recession to make sure they're ready.
James, Blackstone's executive vice chairman, also detailed how technology is affecting the private equity firm from the investment process to hiring practices. For example, Blackstone is using artificial intelligence to screen job applicants.
“It's affecting everything about our business and we're really trying heavily to lean forward into this,” James said.
To contact the reporters on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net;John Gittelsohn in Los Angeles at johngitt@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Josh Friedman, Alan Mirabella
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