SPY - Why The Yield Curve Is Not Broken

2024-06-13 02:28:59 ET

Summary

• The yield curve is often seen as one of the better early warning indicators for a recession.
• Since 2022, the yield curve is inverted again and warning of a recession which has not happened so far, making some question the reliability of the indicator.
• But when looking at other indicators including delinquency rates, unemployment data or housing and construction data we see the situation slowly getting worse.
• Overall, I still think we should listen to the warning the yield curve is giving us.

At the beginning of November 2023, I wrote an article titled Now, Where Is Your Recession? and in this article, I already raised a question that still seems relevant at this point: despite expecting a recession, the U.S. economy is still performing strong. The prediction of a recession is often based on the inversion of the yield curve but since the yield curve inverted a long time has passed (over two years since the first sign). In my previous article I wrote the following conclusion:

I personally expect the market to crash to about 3,200 points in the next few months (after we see a small recovery before). And this is only the first target on our way down.

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