Part 3/11:
Historically, an inverted yield curve has preceded every major recession in the modern era, including the recessions of 2001, 2007, and the downturn during the Great Depression in 1929. The pattern is clear: after a period of inversion, a recession typically unfolds within about a year.
The Paradox of 2025: A Disconnection Between Indicators and Reality
One year ago, the yield curve steepened significantly out of inversion, suggesting that recession was imminent. Yet, in 2025, we observe no corresponding downturn. The stock market remains near all-time highs, and real GDP growth hovers around a healthy 2-3%. The unemployment rate has risen by about a percentage point, but the National Bureau of Economic Research (NBER) has yet to declare a recession.