Written by John O’Donnell, Online Trading Academy
The Chart of the Week
Seven times in the past 50 years the yield curve has become flat or gone even further to invert. There have been 7 recessions in the last 50 years. All 7 flat or inverted yield curves have occurred at the beginning or just before those recessions. That is why we are watching with concern the flattening yield curve now occurring. If it continues to become completely flat we will probably go from 7 for 7 to 8 for 8 for this indicator in modern times.
Discussion of the yield curve continues after the Read more >> jump.
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I have backtested this flat yield curve indicator for all 60 recessions in U.S. economic history. In all but one case the recession has been preceded by a flat or negative yield curve.
Source: YouTube
