Treasury Yield Curve Inversion Deepens; Leading Economist Forecasts Likely 2024 Recession Despite Hopes for Soft Landing
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The US 10-year Treasury yield has been inverted below the 3-month yield since November 2022, a pattern that has preceded every recession since 1982 with no false signals.
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Typically the Fed stops hiking rates when the yield curve inverts, but this time they overlooked the warning and kept hiking as the inversion deepened.
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The economist who first documented the recession predicting power of yield curve inversions, Campbell Harvey, argues a recession is likely in 2024 based on past average lags.
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However, some positive forces like fiscal stimulus and a strong labor market could lead to a soft landing.
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Harvey's base case is that the yield curve inversion will correctly predict a 9th straight recession despite hopeful views to the contrary.