BlackRock fixed income chief Rick Rieder said he does not believe the inverted yield curve is signalling a recession this time.
The flattening yield curve has been spooking markets, particularly this week when the 5-year Treasury yield slid below both the 3-year and 2-year yield, "inverting" the curve. The move was a signal to traders that the rest of the curve could also invert, as the more closely watched 10-year yield was just 9 basis points above the 2-year yield.
Stock index futures on Thursday pointed to more declines on the economic slowdown fears.
"Historically this inverting of the curve was not just the best barometer, it was the only barometer of a recession," said Rieder, BlackRock's chief investment officer of global fixed income. "Now, it's a function of the Fed that has the front end at elevated levels, and you're issuing a lot of debt."
Rieder said he does see the economy slowing, inflation should move lower, and he expects 2 percent growth next year.
"We're decelerating. We were running over 4 percent growth in the second quarter. You have this unbelievable tailwind of fiscal and tax policy. I don't think we're going into a recession in 2019, and I think it's questionable if you're going into a recession in 2020, but we are tangibly slowing," he said. "The interest sensitive part of the economy is slowing — mortgages, housing, small business lending are all slowing."