A Sign of Future Recession
By all accounts, the U.S. economy is doing well, and has been for a long time. Unemployment is at an 18-year low, businesses are growing and the stock market has been on a historic, bullish climb. But some on Wall Street are closely watching one economic indicator — the yield curve — that has a history of predicting an end to all of that: Recession.
The yield curve — a somewhat obscure (if you aren't in finance) display of interest earned, or the yield, from treasuries — rises from low to high in a healthy economy. But when things are shaky, it can flatten and even inverts. And in every instance of a yield curve inversion since 1970, a recession has followed within a year.
Currently, the curve is still bending the right way, but it's getting flatter, and that has some people concerned. But how much stock can we still put in this historic predictor? And really, what does it even mean? This week on Money Talking, Charlie Herman gets answers from two yield curve wonks (or at least one super fan), Cardiff Garcia and Stacey Vanek Smith, co-hosts of Planet Money’s "The Indicator" podcast from NPR.
