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Why Markets are Worried About the Yield Curve

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Why Markets are Worried About the Yield Curve

Explainer: Why Markets are Worried About the Yield Curve

If you pay any attention to financial media, chances are that you’ve heard increased chatter about the flattening “yield curve” in the past few weeks.

For professional investors, talking about the yield curve is close to second nature – but to most regular folks, the words probably sound very abstract or esoteric.

What’s a Yield Curve?

The yield curve is a curve showing several yields or interest rates across different bond contract lengths.

In a normal credit environment, the premise is that yields are higher for longer maturity bonds.

Normal Yield Curve

In a way, this is similar to what you’d expect if you went to the bank and put your money into a time deposit. For example, if you put your money in for five years, you’d expect a higher return per year than if you put your money in for six months.

Why? You’re taking on more risk, and therefore deserve a higher rate of compensation.

Out of Whack

Sometimes the market gets out of whack, and yield curves do some interesting things.

Yield Curve Inversion

As you can see above, sometimes long-term interest rates can be equal to those of short-term rates. This is called a “flat” yield curve.

Or, when long-term rates fall below short-term rates, that is an “inverted” yield curve. As you’ll see shortly, this can be a signal of trouble in credit markets and the greater economy as a whole.

The Curve Everyone is Talking about

While a yield curve can be shown for any bond, there is one particular yield curve that you’ll often see referenced by financial journalists and analysts.

That would be the yield curve for U.S. Treasuries, the bonds issued by the U.S. federal government to fund its activities. More specifically, the difference between 10-year and 2-year bonds has been a historical indicator of the health of the economy and markets.

And despite this curve looking pretty normal since the financial crisis, it has been flattening over time:

2-yr3-yr5-yr7-yr10-yrDifference (10yr - 2yr)
20140.54%1.02%1.72%2.16%2.48%1.94%
20150.74%1.05%1.53%1.92%2.20%1.46%
20160.74%0.86%1.12%1.39%1.54%0.80%
20171.27%1.38%1.63%1.88%2.05%0.78%
20182.64%2.71%2.76%2.83%2.88%0.24%

Source: U.S. Treasury Dept (Each year’s data corresponds to this day in September)

In 2014, the difference for 10-year and 2-year bonds was 1.94%. Today, the difference is just 0.24%!

Why It Matters

There are various interpretations out there of what an inverted yield curve could mean for markets.

There are also pundits out there who say things are different this time around. There is some validity to this, as things are never cut and dry in economics. Besides, this wouldn’t be the first time that global credit markets have acted in strange ways since the crisis.

That all said, the reason the inverted yield curve is a topic of conversation is simple: inverted yield curves have preceded every post-war U.S. recession.

So now you know what the fuss is about – and maybe, just maybe, you’re more inclined to dive deeper into the exciting world of yield curves.

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Retail

The World’s Top Retail Companies, by Domestic Revenue

As price pressures and e-commerce reshape shopping behaviors, we show the top retail companies by domestic revenue around the world.

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This circle graphic shows the world's top retail companies by domestic revenue.

The World’s Top Retail Companies, by Domestic Revenue

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

The retail sector plays a vital role in powering economies, contributing $5.3 trillion annually to America’s GDP alone.

Moreover, the industry is America’s biggest private-sector employer, responsible for one of every four jobs, or 55 million employees. Yet in today’s challenging consumer environment, retailers are facing higher e-commerce penetration and inflationary pressures—across an industry notoriously known for razor-thin margins.

This graphic shows the world’s top retail companies by domestic revenue, based on data from the National Retail Federation.

Methodology

To be included in the rankings, companies must engage in a goods-for-consumer resale business accessible to the public and have direct selling operations in a minimum of three countries.

The rankings include both publicly and private companies, and are based on the most recent 52-week period analyzed by the National Retail Federation between January and March 2024. All revenue figures were converted to U.S. dollars.

Ranked: The Top 10 Global Retailers by Domestic Sales

Here are the leading retailers worldwide based on domestic sales as of 2023:

RankingRetailerDomestic Retail Revenue
(USD)
Share of Total Retail RevenueHeadquarters
1Walmart$532.3B85%🇺🇸 U.S.
2Amazon.com$250.0B70%🇺🇸 U.S.
3Costco$175.4B75%🇺🇸 U.S.
4The Home Depot$142.0B94%🇺🇸 U.S.
5Walgreens Boots Alliance$105.1B89%🇺🇸 U.S.
6Alibaba$91.5B97%🇨🇳 China
7Apple$70.9B87%🇺🇸 U.S.
8Aeon$64.3B93%🇯🇵 Japan
9Schwarz Group$56.5B32%🇩🇪 Germany
10Rewe$55.5B75%🇩🇪 Germany

Walmart towers ahead as the world’s largest retailer with $532 billion in domestic revenue—more than Amazon.com and Costco combined.

Known for its everyday low prices, Walmart achieves a competitive advantage through pricing goods approximately 25% cheaper than traditional retail competitors. Overall, groceries make up more than half of total sales. While its main customer base is often low and middle-income shoppers, the retail giant is seeing a surge in sales from higher-income customers as shoppers seek out lower grocery prices.

E-commerce giant, Amazon, is the second-biggest retailer globally, commanding nearly 40% of online retail sales in America. Since 2019, the number of Amazon employees has grown from 800,000 to over 1.5 million in 2023.

While the company has tried to introduce online grocery platforms to the market, it has largely fallen flat given its clunky system in a highly competitive market.

Like Amazon, China’s e-commerce juggernaut, Alibaba, stands as a leading global retailer. Overall, 97% of revenues were generated domestically through online marketplaces Taobao and Tmall. In recent years, the company has focused on international expansion, delivering products to 11 markets including America, in just five days.

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