Chart of the Day - Tuesday, March 29th, 2022

Today’s Chart of the Day was shared by Callie Cox (@callieabost). The 2yr/10yr yield curve briefly inverted today for the first time since 2019. The yield curve has been known to be one of the best economic indicators out there. It has inverted before all of the past 10 recessions since 1950, but there are some important caveats to consider.  For starters, another closely watched part of the yield curve, the 3mo/10yr, is nowhere near inversion. Another important point that Callie makes is the fact that it has historically taken anywhere from 5-33 months to see a recession after the 2yr/10yr curve has inverted in the past. The last time it inverted in 2019, the S&P 500 rallied another 17% in less than six months before peaking along with the economy. This is definitely worth keeping in mind, but it can be psychologically and financially painful to try and time this signal. For more on this, check out the full thread.