The yield curve just inverted, recession looming?

Chris0nllyn

Chris0nllyn

Well-Known Member
In 1986, Campbell Harvey published his dissertation linking yield curve inversions (rare situations when short-term interest rates exceed long-term rates) to recessions. He studied the four recessions from the 1960s to 1980s and his indicator proved to be accurate.

In the three recessions that followed his dissertation, the yield curve again inverted before each one –including the 2008 global financial crisis.

June 30 marked the day where the yield curve was inverted for a full quarter -- triggering a recession forecast.
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There are three other indicators I focus on. First, the Duke-CFO survey, which has been going on for 25 years, has an excellent track record. CFOs know the capital spending and employment plans before the plans are executed. Two-thirds of the U.S. CFOs believe a recession will begin in 2020. Second, in the policy arena, I focus on anti-growth policies. Currently, both the U.S. trade disputes as well as the specter of Brexit for the UK and EU are anti-trade and anti-growth. Finally, I look at the level of uncertainty in the economy. This one is difficult to measure. Our business cycle is 121 months and counting and the longest on record. It is feeling old and many are questioning the robustness of future growth. Additional uncertainty increases risk and decreases the attractiveness of business investment.
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https://today.duke.edu/2019/07/its-official-yield-curve-triggered-does-recession-loom-horizon
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jrt_ms1995

jrt_ms1995

Well-Known Member
There seems to be a pretty consistent lag (1 - 2 years) between a low-point and official 'start' of recession.
 
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