The David Lin Report Fund Manager: Yield Curve Flashed A Major Warning | David Sherman
Jul 15, 2025
David Sherman, Founder and CIO of CrossingBridge Advisors and NYU Stern instructor, shares his expertise in high-yield debt. He discusses concerning high equity and real estate valuations amid tight bond spreads. Sherman predicts a steeper yield curve and notes potential dollar devaluation due to Fed policies and tariffs. He emphasizes careful investment strategies during such economic uncertainty and critiques traditional views on the yield curve as a recession predictor. He also touches on the rise of SPACs and their impact on modern investing.
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High Valuations and Tight Spreads
- Equities and real estate are currently at very high valuation levels.
- Bond spreads are tight, offering investors limited compensation for risk.
Yield Curve Predicts Recession and Steepening
- The yield curve has normalized after inversion, typically signaling a recession is underway or imminent.
- Sherman expects a steeper yield curve with short-term rates falling, though long-term direction is uncertain.
Seek Risk-Compensated Niche Assets
- Investors should seek assets where risk is properly compensated and clearly understand lock-up periods.
- Less traditional securities like tax lien assets can offer attractive yields with good credit protection.