In The News

Wall Street Is Freaking Out About One Major Recession Indicator

Wall Stree investors and economists are sounding the alarm over a yield curve inversion, one of the most reliable indicators that a recession is coming, according to The New York Times.

The yield curve inversion, or when two-year bonds have a higher return than ten-year bonds, hit its largest spread yet on Wednesday, sending investors into a panic, according to the NYT. Economists and investors see this kind of inversion as a negative omen for the economy, and every recession in the U.S. in the last 50 years has been preceded by a yield curve inversion.

“It is incumbent upon any company’s managers to take the yield curve as a negative signal and engage in risk management. And for people too. Now is not the time to max out your credit card on an expensive holiday,” Campbell Harvey, an economics professor at Duke University, told the NYT.

On Wednesday two-year rates stood at 3.23%, substantially higher than the 3.03% yield investors get on 10-year notes, according to the NYT.” target=”_blank” rel=”noopener
A yield curve inversion often precedes a recession because higher short-term bond returns come when the Federal Reserve is raising interest rates to prevent inflation, which contracts economic growth, Will Hild, Executive Director of Consumers’ Research, told the Daily Caller News Foundation.

“Higher short term rates basically says that the bond market is pricing in a number of interest rate hikes in the short term that the Fed will enact to alleviate inflation by restricting lending and cutting demand. But this also makes certain things that were profitable for companies to do beforehand unprofitable since they have to pay more to borrow money, and this can lead to a recession or slowed growth,” Hild told the DCNF.

At the same time, lower long-term rates come when more investors are concerned about long-term growth and rush to put their money in bonds rather than stocks, thereby driving down bond rates, according to The Wall Street Journal.

Though the yield curve inversion does not itself affect the economy, it does signal potential economic downturn, according to the WSJ.

Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact

Max Keating

Published by
Max Keating
Tags: recession

Recent Posts

US EV Industry Shifts Back Into Reality Gear

At the start of each year, I write a piece in which I make a…

5 hours ago

Home Prices Under Biden Just Hit A New Milestone

Home prices hit a record high in May despite falling demand and sales activity, The…

5 hours ago

Trump Pulling Close To Even In Blue State That Hasn’t Voted Republican In Half A Century

Former President Donald Trump is closing in on President Joe Biden in Minnesota, a state…

6 hours ago

Republicans Outpace Dems In Fundraising As Control Of Key Legislatures Hangs In Balance

Republican campaign committees tasked with electing conservatives to state legislatures hold a significant fundraising advantage…

6 hours ago

Our Debater-In-Chief Takes A Week Off To Learn How Great His Presidency Has Been

If the current reports are correct, the dunce in the White House is going to…

6 hours ago