Powerful Recession Signal Getting Wall Street’s Attention

The article points out that “the financial markets can sometimes sniff out problems with the economy before they show up in the official economic snapshots published on G.D.P. and unemployment,” adding, “Another notable yield curve inversion occurred in February 2000, just before the stock market’s dot-com bubble burst.” It emphasizes, however, that the yield curve isn’t a good predictor of exactly when a recession might begin. “In the past,” it says, San Francisco Fed data showed that “the recession has come in as little as six months, or as long as two years, after the inversion.”

According to Matthew Luzzetti, a senior economist at Deutsche Bank, focus on the yield curve should be tempered: “In the current environment,” he said, “I think it’s a less reliable indicator than it has been in the past.”

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