The major indexes were awash with red ink last Friday as fears of a global economic slowdown was compounded by market noise of an inverted yield curve blaring from the bond community. To former Federal Reserve Chairman Janet Yellen, this shouldn’t sound the trumpet on a recession, but a rate cut.

“I don’t see it as a signal of recession,” Yellen said during a question and answer session at the Credit Suisse Asian Financial Conference.

Last Friday saw the short-term 3-month and longer-term 10-year yield curve invert, which hasn’t been seen since 2007–just ahead of the financial crisis. This helped send the Dow Jones Industrial Average south by 460 points.

“Could it be that the yield curve is signaling weak global economic growth and low inflation without necessarily implying a recession in the US? We think so, and the US stock market apparently supports our thesis,” Ed Yardeni of Yardeni Research said in his morning note Friday. “So why are global stock markets also doing so well? Perhaps there is too much pessimism about the global economic outlook.”

The spread between the 3-month and 10-year notes fell below 10 basis points for the first time in over a decade. This strong recession indicator contrasted a more upbeat central bank on Wednesday, but investors were quick to sense the cautiousness.

Yellen’s assessment comes after the central bank’s decision to keep interest rates unchanged last week. In move that was widely anticipated by most market experts, the Federal Reserve on Wednesday elected to keep rates unchanged, holding its policy rate in a range between 2.25 percent and 2.5 percent. In addition, the central bank alluded to no more rate hikes for the rest of 2019 after initially forecasting two.

In the video below, Nick Maroutsos, co-head of global bonds at Janus Henderson, examines the inversion of the yield curve and compares economic indicators out of Europe and the United States. He speaks on “Bloomberg Daybreak: Americas.”

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