Every US recession since 1955 has been preceded by an inverted yield curve — 9 for 9. It's one of the most reliable macro signals available to investors, and one of the most frequently misread.
What the signal actually tells you
An inverted yield curve (short-term Treasury yields higher than long-term yields) reflects the market pricing in future rate cuts, typically because investors expect the economy to weaken. It is directional, not precise: the lead time from inversion to recession onset has historically ranged from 6 to 24 months. Treating it as a countdown clock leads to premature positioning.
Why it's one signal among several
The 10Y-2Y Treasury spread is one of ten components in the Conference Board's Leading Economic Index, which typically peaks 6-12 months before a recession. Used in isolation, the yield curve tells you direction; combined with other leading indicators (building permits, ISM Manufacturing PMI, credit spreads), it becomes a more complete picture.
The full breakdown
We put together a complete guide covering the mechanics, the historical record back to the 1970s, and the most common mistakes investors make when using this signal for positioning decisions: https://vextorcapital.com/learn/macro
Not financial advice — for educational purposes only.
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