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DISPELLING
THE CERTAINTY MYTHS ABOUT
YIELD CURVE INVERSION AS A RECESSION INDICATOR
by Bob Bronson
Bronson Capital
Markets Research
June 30, 2005
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Some perma-bulls and new bulls are claiming that history shows only full yield curve inversions lead to recessions. That is simply not true. It isn't even true that all yield curve inversions have led to recessions. Nor is the degree of a yield curve inversion all that telling about the business cycle, since the US economy takes more excess to cycle. But a sharply narrowing yield curve, somewhat excessive inventories, an oil price spike, a resumption of the Supercycle stock bear market and coming national housing price declines on top of an overly-indebted consumer sector in a primarily asset-based, rather than income-based, economic recovery, with weak employment and capex growth, is not likely to lead to just a "normal" recession.
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