The Business Cycle Forecaster That Has Predicted Every Major Economic Shift Since the 1960s Is Warning of a New Era of Uncertainty

Recession Indicator Not Wrong: 59 Years What's Next?

A closely watched recession indicator has once again flashed red, warning of an impending economic downturn. And this time, it's not just any old indicator – it's the same one that correctly predicted every recession over the past 59 years.

The indicator in question is the yield curve, which measures the difference in interest rates between short-term and long-term government bonds. When the yield curve inverts, meaning short-term rates rise above long-term rates, it's often a sign that investors are becoming increasingly risk-averse and expecting a recession.

As of March 15, the yield curve has indeed inverted, with the three-month Treasury bill yield sitting at 4.45% and the 10-year Treasury note yield hovering around 3.45%. This marks the 14th time the yield curve has inverted since 1960, and the first time it's happened since 2019.

So, what's next? Well, history suggests that a recession follows the yield curve inversion within a year about 70% of the time. That means we could be looking at a recessionary period as early as the end of 2025 or as late as 2026.

Of course, the yield curve is just one of many recession indicators, and its accuracy is far from foolproof. Other indicators, such as the National Bureau of Economic Research's official recession dating committee, may have different signals.

Still, the yield curve's track record is impressive, and investors would be wise to take notice. As the saying goes, "past performance is no guarantee of future results," but the yield curve's 59-year streak of accuracy is certainly something to consider when making investment decisions.

For now, the market is holding steady, with the S&P 500 index hovering around 4,100. But as the yield curve continues to invert and the economic outlook grows increasingly uncertain, investors may want to start preparing for the worst – or at the very least, diversifying their portfolios to minimize potential losses.