Even as stock investors cheer signs of inflation peaking, the bond market’s best-known predictor of recessions is showing its clearest signal yet that there is trouble ahead for the US economy.
It’s known in Wall Street lingo as an inverted yield curve, and in recent days it has moved to its most extreme levels since the 1982 recession thanks to a big drop in long-term bond yields. When this dynamic has been in place over the last two decades, in each case a recession has followed. (For a look at the history of yield curves and recessions, see our earlier story here.)
While an inverted US Treasury yield curve isn’t known as a predictor of how deep or how long a recession may last, or even when a recession will begin, market watchers say the current message is unmistakable.
“Historically, when you get a sustained inversion like this […] it’s a very reliable indicator of a recession coming,” says Duane McAllister, a senior…
