Why There Is Too Much Emphasis on Recession and the Inverted Yield Curve in 2019

Get ready, because the recession is coming. The only problem is that the “when that will be” probably is not as soon as many financial media reports might have you scared about. There is a misconception out there after the U.S. Treasury’s yield curve recently inverted, meaning long-term interest rates are lower than some short-term and intermediate-term rates, that means the next recession is around the corner.

Many undecided factors with unknown outcomes are going to have to play themselves out for the next formal recession to arrive. We can argue all day long about the socialist movement in America being economically damaging, or we can argue about the ongoing “soon to be, but as of yet unresolved” trade spat with China or about slower global growth rates and even Brexit for some international watchers at a more granular level. Until some more time plays out, and until the actual result of the outcome is seen, the reality is that it’s just too soon to jump the gun with formal recession timing as being imminent.

The next recession’s timing because of the current yield curve simply isn’t giving the same message as in many past instances. The 2019 inversion has been a “barely inverted” curve. Not all long-term rates went under short-term and intermediate-term ones, and those that did simply did not do it very much. There is also a backdrop in which rates in Europe and Japan are very positive again, which was not really the case in decades past.

The financial media also may have played a role in just how much this inverted yield curve really means in the big picture. The inverted yield curves of years past also came at significantly higher rates than today (I was selling CDs with close to 10% yields about

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