How to predict when the next recession will hit

[AZ Progressive]

This is what is called the US Treasury yield curve spread, the 10 year treasury bond rate minus the 2 year treasury bond rate.

This shows that market behavior can show when investors are predicting a recession, and is better than listening to so called market experts.

See this for yourself:



As you can see, once the 10y-2y treasury spread goes down below 0 into negative territory for awhile, one should prepare for a recession sometime within the next year or two.


You can see an interactive graph with the latest treasury spreads here:

https://research.stlouisfed.org/fred2/series/T10Y2Y

Btw the latest number as of Dec 30, 2015 is 1.23

[PatrickforO]

1. Nice possible leading indicator...

[Liberal_in_LA]

2. So all is ok?

[ProgressiveEconomist]

3. Yes, inverted yield curves

are a good though rarely-seen indicator of market direction. See http://www.bloomberg.com/markets/rates-bonds/government-bonds/us for a frequently-updated term structure chart.

Google "contango" to see that the same principle applies to other markets, but with complications engendered by the need for storage and rollover of futures contracts for commodities such as oil, wheat, and FCOJ.