Yield-Curve Inversion Is Sending a Message
The question is whether it’s saying anything meaningful about the odds of recession.
Bloomberg, February 3, 2020
The yield curve just inverted — again.
Driven by fears of a potential coronavirus pandemic that could cause widespread economic disruption, investment capital sought shelter in longer-term bonds. This flight to safety caused the curve to invert, at least for now.
The sages will tell you that yield-curve inversion is about as good a prognosticator of a coming recession as there is. But inversion first occurred back in March 2019, then briefly reversed, only to head back into inversion territory for much of the summer.
So far, we have avoided a recession and the economy continues to muddle along at an annual growth rate of a little more than 2%.
The most recent yield-curve inversion invites the question: What might trigger the next recession and what might it look like? Let’s look at a few things cited by pundits and commentators: