[Editor’s Note: The following originally appeared on FactSet.com. Sara Potter is director of ETF research and analytics for FactSet.]
We just completed the 10th year of this economic expansion, now officially tied for the longest business cycle expansion in the postwar period. This expansion has now lasted 120 months, matching the length of the 1991-2001 expansion.
While most economists will tell you that expansions don’t die of old age, the odds of fatal missteps increase the older they get. Even though this expansion appears to still have some legs, there are growing signs that the party may be coming to an end.
For a larger view, please click on the image above.
Inverted US Treasury Yield Curve
An inverted yield is generally considered a precursor of a recession. The U.S. yield curve has been flattening steadily over the last nine months and is currently inverted.
Since October 2018, the spread between the U.S. 10-year Treasury note and the U.S. three-month Treasury bill has fallen from more than 1% (as of June 25).
This measure of the yield-curve slope also inverted at the end of March, but at that time, markets were soothed by hopes for an impending trade agreement with China, and the 10-year Treasury rose in response.
May’s events, including a resumption in the tit-for-tat tariffs by both the U.S. and China, have stoked fears of an extended trade war which would increase the odds of a global economic recession, suppressing long-term yields.
In addition, the Fed’s recent shift to a more dovish stance has caused a downward shift of the entire curve.
For a larger view, please click on the image above.
