We here at No Nonsense Forex don’t just rely on one thing to tell us what’s about to happen.
Confluence matters. So here is some confluence for you.
2nd Confirmation Indicator
Refer back to this article if you are not familiar with the first chart we have done here regarding timing the recession.
We’ve all heard of the yield curve, correct?
Do you know what it is, and why it’s significant?
Don’t worry, you don’t have to.
Just watch the chart I’m about to post.
The yield curve is inverted, and this is actually important, because it has signaled a future recession every time in the past 40 years.
When it un-inverts — get your ass ready.
I’ll just go ahead and post it now, then spend the rest of the blog post explaining the important parts.
Okay, I hope everyone can see it, especially mobile users.
This is in regards to the 10yr and the 2yr treasury bond yield curve inversion — the one almost everyone out there in Macro-land refers to.
When it drops below the zero line — it’s inverted.
Recessions, like before, are highlighted in gray.
Just like the chart I showed weeks ago, it’s not the scary part (inversion, high interest rates) that precedes a recession.
It’s the start of the healing process that does.
So in this case, all throughout the last 40 years (things were WILD in the early 80s, so like before, we start after that), once the yield curve inverts, we wait for it to uninvert, then a recession soon follows.
You can say there was one exception, as right before the 2020 “recession” (it wasn’t) the graph bounced off of the zero line, as opposed to crossing it.
But I do recall back then people panicking because the curve inverted. The chart is monthly, so perhaps by the end of the month, it got back to zero.
Now, mind the fake-outs here. They happen.
There were several times where the curve inverted, went back to normal, then inverted again.
The highest point the fake-out reached was .5 back in 1998. So if you’re a lunatic and trying to time this thing to the exact month, wait for it to go above that maybe(?)
However, during none of those times did the curve invert as heavily as it has right now.
And the Fed thinks we’re in for a soft landing??
This chart I provided is not the “so easy a monkey could read it” version I posted weeks ago.
But it’s damn accurate, quite helpful, and a second piece of confluence for you all to decide when it’s really time to pack it in and get ready for the storm.
Which assets do really well in a storm?
We’ve already talked about it, but will almost certainly be talking about it again on the 10-Minute Contrarian Podcast.