At a time of widespread uncertainty, a key recession indicator is offering hints about where the economy might land next, but with a twist from historical norms.
Specifically, the yield curve, which has accurately predicted past recessions, is flashing warning signs. However, this time, it might not be so straightforward in tandem with past trends, according to an outlook by Bravos Research in an X post on March 4.
The platform noted that the U.S. yield curve “uninverted” in October 2024, ending the longest inversion in history at 793 days—surpassing the 700-day record set before the Great Depression.
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Historically, yield curve inversions signal economic distress, with “uninversions” often preceding recessions. In 2007, the curve was “uninverted” six months before the financial crisis, and in 2001, just months ahead of that year’s recession.
Despite four months having passed since the latest uninversion, the U.S. economy has yet to fall into recession.
In this regard, Bravos Research highlighted a correlation between the yield curve and coincident economic indicators, which track real-time economic conditions. Typically, the yield curve predicts economic trends a full year in advance.
Given the prolonged inversion throughout 2024, the economy should have struggled—yet it has remained resilient.
This aspect has led to whether the trajectory is a false alarm. However, Bravos Research pointed to two historical exceptions—1967 and 1998—where the economy defied yield curve warnings.
In both instances, the yield curve inverted, but no recession followed, primarily due to a strong labor market.
Currently, jobless claims remain low even as the yield curve steepens, mirroring those past anomalies. This raises the possibility that the widely watched recession signal may not play out as expected.
What next for recession
However, Bravos Research warned that this divergence may only be temporary. In 1967 and 1998, the yield curve eventually reinverted, with the second inversion correctly predicting a recession. If history repeats itself, the next downturn could simply be delayed rather than avoided.
While the timing remains uncertain, the research entity maintained that a recession is still on the horizon.
“This could mean that over the next year, we see the yield curve reinvert before the next recession happens. This is why, although we have pushed out our timeline for the next recession, we still believe the next one isn’t too far off the horizon,” the platform noted.
It’s worth noting that recession talk has dominated the economic outlook in recent months but cooled in late 2024 after the Federal Reserve implemented its first rate cut in about two years.
Other recession indicators
However, besides the yield curve, other indicators, such as the U.S. job market, have been pointing to troubling times.
As reported by Finbold in early February, the Bureau of Labor Statistics indicated that hiring dropped to 3.2% of total employment in December 2024, its second-lowest level since 2020.
This figure remained well below the pre-pandemic average of 3.8%, fueling concerns of a slowing labor market, which could signal an economic downturn.
Similarly, economist Henrik Zeberg, citing the Financial Select Sector SPDR Fund, warned of a possible Black Swan event in 2025 while maintaining that a recession was imminent despite last year’s Fed rate cuts.
However, some experts remain optimistic. In October, a Bank of America survey found that most global investors dismissed the possibility of a hard landing within a year, ruling out an imminent recession.
As things stand, stock and cryptocurrency markets are tanking amid escalating economic uncertainty triggered by President Donald Trump’s official rollout of additional trade tariffs.
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