US Bank Earnings Challenge the Validity of Popular Recession Theory

The robust earnings at megabanks from JPMorgan Chase & Co. to Wells Fargo & Co. have poked holes in a popular theory: that an inverted yield curve hurts lenders and eventually leads to a recession.

The conventional wisdom, at least in some corners on Wall Street, is that banks borrow at short-term rates and lend long, so when the yield curve turns upside down, it squeezes lender margins, which eventually leads to a credit crunch.

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