The yield curve is the most reliable predictor there is in finance. [ See a variety of links below - the first one is an overview, but the others are more resea

The yield curve is the most reliable predictor there is in finance. [ See a variety of links below - the first one is an overview, but the others are more research-oriented. ] In capital markets, in order to justify taking risk, there has to be an accompanying return, otherwise people will not invest. Inversion of the yield curve signals exactly that - returns are not enough to justify the risk, and that capital expenditures will go down, leading to lower returns, lower employment, and also a recession. There is one key thing that very few people are talking about, however - the Fed basically controls the debt issuance, and has some (possibly even significant) ability to nudge the market in the direction it wants by buying/selling towards one end of the curve or the other. This alone can effect the economy, but the Fed does not have a strong history here. But it's definitely possible, and I think we may experience that with the current Fed President, Jerome Powell. [0] https://www.schwab.com/resource-center/insights/content/eye-on-indicators-what-does-yield-curve-tell-us https://www.schwab.com/resource-center/insights/content/eye-... [1] https://www.newyorkfed.org/research/capital_markets/ycfaq.html https://www.newyorkfed.org/research/capital_markets/ycfaq.ht... [2] (PDF) https://www.dnb.no/seg-fundamental/fundamentalweb/getreport.aspx?file=MRP_111807.pdf&uid=552&auth=fvCK5RMJbEV3ukUxiDaCQWMwx9A%3D https://www.dnb.no/seg-fundamental/fundamentalweb/getreport....