Investing with a Steep Yield Curve

World Beta with some great analysis on how a variety of asset classes have historically performed given the steepness of the 3 month to 10 year points in the yield curve in his post Investing Based on the Yield Curve – REITs Like it Steep.

Here is the data in chart form separating returns into times when the yield curve was relatively flat (less than 1%), moderate (1-2%), or steep (more than 2%)....



Surprising (to me) is not the outperformance of REITs during periods in which the yield curve is steep (steep yield curves are good for banks, which means in normal times they are more willing to lend [this time may be different warning]), but the STRONG underperformance of commodities and gold during these times (I figure most of the times that the yield curve was steep over this period was during downturns when the Fed was adding liquidity or in other words disinflationary periods, which aren't good for commodities).