2-10 US Treasury Yield Curve and SPX S&P 500 Charts Displaying Past Recessions

The St Louis Fed (Fred data base) 2-10 yield spread chart is shown above with the shaded areas indicating recessions. Note the black hooks that bring on each recession. When the 2-10 spread reverses, the recession is coming or here. The black hooks are pulling the tired old economic Vaudeville act off stage into recession.

Some analysts are not worried about a recession, or they say it will be mild, or they talk about a soft landing, perhaps due in part to the spread continuing lower. It is like falling out of a building. It is not the fall that is the problem, it can be quite exhilarating, it is the sudden stop at the end that kills you. It is the hook higher with the 2-10 spread that kills an economy.

Analysts, investors and traders, that want to find a silver lining to the stock market garbage over the last year, see how even when the 2-10 spread recovered (little circles), it was a few months before the recession hit. Also, the spread may continue lower before it does turn which is even more time before recession is a worry, if ever. Thus, while finishing off the eggnog, Wall Streeter's proclaim, "What? Me worry?" like Alfred E Neuman.

It is correct that the recessions took a while to arrive after the 2-10 spread started recovering back towards non-inversion (above zero), but the big pullback in 1980-1982 was a more serious beast. Note that when the 2-10 spread bottomed and reversed in this time period, it was big and sharp and the recessions in that period appear directly when the reversal off the bottom occurred; there was no lag. Wall Street does not want to look at that example.

The 1980 and 1981 recessions appeared immediately when the 2-10 spread reversed. They got the hook like Keystone during his comedy routine the other night. The 1990 recession was 15 months from the turn at the bottom to when the recession started, hence, many analysts say this is where we are at today (many months away from a recession if it ever arrives).

The 2000 recession was 7 months; only a half-year of time passed after the 2-10 spread reversed and the recession started. The 2007-2008 recession was 13 months after the turn off the bottom. The pandemic recession in 2020 was 6 months after the bottom. In summary, for 6 recessions, 2 occur directly when the 2-10 spread reverses, 2 take about 6 months for the recession to arrive after the 2-10 spread reverses, and 2 take a year or so before the recession arrives. Choose your poison.

Keystone surmises that we are in recession now, Q1 of 2023, so the 2-10 spread will likely recover higher (yellow box) from here. Keystone's Housing Market Indicator signals that a housing recession started a few days before Christmas and it is interesting to see the housing data lay eggs in recent days confirming the sad news. Can a US recession be far away if the housing market is slip-sliding away, as Paul sings?

The SPX chart shows the pullbacks in stocks that occur as the recessions take hold and slap investors silly. It is interesting to look back at the last five decades and the ongoing demise of America's faux free market and rigged crony capitalism system. 30 million Americans screwed the other 300 million over the last five decades and now the 300 million are going to screw the 30 million back. Payback's a bitch.

What fate is ahead in the yellow box? Do you think the recession is here, right now, in Q1, or are you drinking the Wall Street Kool-Aid provided by Chairman Powell and Treasury Secretary Yellen? The yellow box is Our Destiny. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added Saturday Morning, 1/7/23: The 2-10 spread is at 69 bips. The 10-year yield is 3.56% and 2-year yield 4.25%. (525-356=69).

Note Added Tuesday Morning, 1/10/23: The 2-10 spread is at 68 bips. The 10-year yield is 3.56% and 2-year yield 4.24%. The 2-10 spread drops to -74 bips on 1/5/23 now moving higher (back towards zero and non-inversion) to 68 bips five days later. Is it time for the dreaded hook to pull the economy off stage? Most Wall Street analysts are leaning towards no recession or a mild soft recession or soft landing. What will the hook deliver?

Note Added Sunday Morning, 1/15/23: The 2-10 spread is at 73 bips. The 10-year yield is 3.50% and 2-year yield 4.23%. The hook is waiting in the wings.

Note Added Monday Morning, 2/13/23: The 2-10 spread is at 80 bips refusing to place the hook pattern. The 10-year yield is 3.73% and 2-year yield 4.53%. The hook is waiting in the wings. Is it time to hook upwards and bring on the recession?