[16 / 1 / 1]
Quoted By: >>1489706
The question of whether the U.S. economy is heading toward recession is a polarizing one.
The labor market has essentially stagnated with very few jobs being added on a monthly basis. Job openings have dropped to the lowest level since the post-pandemic period. Government and consumer debt levels are continuing to climb and affordability has been a hot topic for years.
One signal, however, indicates a recession might be closer than we realize.
The shape of the Treasury yield curve often provides clues as to which way the economy might be heading. The long end of the curve is more influenced by what's going on in the economy. At a high level, rates tend to rise when the economy is in good shape and fall when conditions look questionable. The short end of the curve is highly influenced by the current Fed Funds rate.
History shows that when the difference between the 10-year yield and the 3-month yield turns negative, it triggers a recession watch. In other words, short-term rates are probably set too high for conditions and that could lead to an economic slowdown or even a full-blown recession.
When that spread turns positive again, the recession clock starts. At this point, the Fed has probably started lowering rates, but not quickly enough to avoid a downturn.
It turns out that the pattern of this Treasury yield turning negative and then positive has been a reliable recession predictor.
For the past four recessions, the 10-year/3-month yield spread turned positive just before a recession officially started.
That spread just recently flipped from negative to positive again.
Does that mean a recession is imminent right now? Not necessarily, but it's not a good sign either. Sometimes, a recession can happen immediately, as it did during the tech bubble. Back in 1991, however, it took more than a year before a recession began.
https://www.fool.com/investing/2026/02/14/signal-triggered-before-last-4-recessions-again/
The labor market has essentially stagnated with very few jobs being added on a monthly basis. Job openings have dropped to the lowest level since the post-pandemic period. Government and consumer debt levels are continuing to climb and affordability has been a hot topic for years.
One signal, however, indicates a recession might be closer than we realize.
The shape of the Treasury yield curve often provides clues as to which way the economy might be heading. The long end of the curve is more influenced by what's going on in the economy. At a high level, rates tend to rise when the economy is in good shape and fall when conditions look questionable. The short end of the curve is highly influenced by the current Fed Funds rate.
History shows that when the difference between the 10-year yield and the 3-month yield turns negative, it triggers a recession watch. In other words, short-term rates are probably set too high for conditions and that could lead to an economic slowdown or even a full-blown recession.
When that spread turns positive again, the recession clock starts. At this point, the Fed has probably started lowering rates, but not quickly enough to avoid a downturn.
It turns out that the pattern of this Treasury yield turning negative and then positive has been a reliable recession predictor.
For the past four recessions, the 10-year/3-month yield spread turned positive just before a recession officially started.
That spread just recently flipped from negative to positive again.
Does that mean a recession is imminent right now? Not necessarily, but it's not a good sign either. Sometimes, a recession can happen immediately, as it did during the tech bubble. Back in 1991, however, it took more than a year before a recession began.
https://www.fool.com/investing/2026/02/14/signal-triggered-before-last-4-recessions-again/
