The danger of recession has not yet been averted
The yield curve in the US remains inverted. A similar constellation last prevailed before the financial crisis.
Source: Bespoke Investment
Long-term bonds typically yield a better return than short-term bonds, in part because investors want compensation for holding them longer. If the most unusual constellation occurs as interest rates at the short end are higher than at the long end, this is referred to as an inverting yield curve.
In the past, an inversion of the yield curve – at least in the US – was a fairly reliable signal announcing an impending recession or weakness in the economy.
As measured by the yield differential between the 10-year and 3-month US government bonds, the US yield curve has now inverted for more than 150 trading days in a row. As the investment chart detailed above shows, this long has only been achieved a handful of times over the past few decades – say in 2006-2007 in the run-up to the global financial crisis. So it does not seem that the risk of the US economy drifting into recession has been averted.
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