This article discusses a recession indicator that has been accurate for 56 years. The indicator is the spread between the 10-year and 3-month Treasury yields. When this spread becomes negative, it suggests an impending recession as investors tend to move away from long-term bonds in favor of shorter-term ones when they expect economic conditions to worsen shortly.
This phenomenon has held since 1965, with only one false signal occurring in 1998 during a period of global financial turmoil caused by Asian currency devaluations and Russian debt defaulting.
Despite its accuracy over time, this indicator isn’t foolproof; other factors at play can influence investor behavior, such as inflation expectations or central bank policy changes, which could lead to inaccurate readings even if the yield curve remains intact.
Nevertheless, it’s still worth keeping an eye on given its track record over such a long period – 56 years without any wrong signals is nothing short of remarkable!
Read more at fool.com
