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Inversions and recessions

One indicator keeps telling investors that things are not completely normal, and that is the inverted yield curve. It is considered a very good indicator of an upcoming recession, although it doesn’t have a perfect record. And since It’s been 2 years since the inversion began, investors are questioning whether this time it will work and wether we’ll have a recession or not. It’s important to note that on average, recessions have started almost a year after the inversion began, but more importantly, 66 days after the inversion is corrected. As you can see in the chart below, we might be getting closer to that point where the yield curve normalizes and has positive slope again, prompting the question of wether this time it will work. The next data point to judge wether it will work, will be the GDP release on July 25th, one week before the next FOMC meeting.

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