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Inversions and recessions

Persistent yield curve inversion (10yr Treaaury - 3month bill) has been a pretty good predictor of economic recessions in the U.S. Since 1969, inversions have led recessions for about a year. The current inversion started on July 2022, which means that, if the indicator is accurate, we should be close to it at this point. It may take longer due to the fact that companies have a very low cost of capital because they secured low interest rates on their debt during #zirp, but latest earnings reports indicated sales growth is slowing down. The FOMC meeting is in 4 weeks, and market expectations point towards no move in rates. The key then, will be on the press conference and the minutes of the committee where J Powell will comment on how he sees the economy and if the Fed members are still concerned about inflation or their worries have shifted towards the economic well being.


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