I'd just like to point out that the yield curve inverted in 2018 [1] yet here we are.
> Prepare for the inevitable recession. It's not different this time.
This point is tautological. Of course there will eventually be a recession. No one can say when.
There are different factors in every cycle. The QE period is essentially unprecedented. The rise of tech stocks in the last 20 years is a once-in-a-century type structural change in the economy.
It's fair to say the market is currently closer to the top than the bottom and above the historical mean and a reversion to mean is inevitable but whether the current mode goes on for days, months or even years is anyone's guess.
> I'd just like to point out that the yield curve inverted in 2018 [1] yet here we are.
My understanding is that this inversion (the 2 year/10 year) is generally regarded as the most reliable indicator of recession. The media has really latched onto the yield curve this time around though, so any inversions have been getting reported as the indicator that a recession will start soon, which isn't really right.
For example, the article you linked from December 2018 was about 3 year and 5 year yields inverting, which tends to happen about 2.5-3 years ahead of a recession. Then the 3 month/10 year spread inverted at the end of May 2019, which tends to predate recession by about 12-18 months. Now the 2 year 10 year is inverted, which tends to happen about 18-24 months before a recession.
So what's happening is a pretty good indication that a recession is likely to occur closer and closer to the present, with each inversion providing another data point about the timeframe. It's just that the media's overhyping of every individual inversion is giving you the sense that these inversions don't tell us anything particularly interesting, when history shows the opposite to be true.
> I'd just like to point out that the yield curve inverted in 2018 [1] yet here we are.
As pointed out in the article you linked, what happened in late 2018 was a small section (3-5 year treasuries) inverted. When people talk about yield curve being a harbinger of recession, they're usually talking about the 2-10 year spread, which is what the parent post referred to.
You may argue "things are different this time", but you shouldn't be comparing apples to oranges.
It needn't be a "collapse", could be a protracted period of little to no growth, and most indications are that it will start in a couple of years at most.
Re: the yield curve inverted in 2018 yet here we are.
There are somewhat different ways to measure it, and by some metrics, it merely "touched" the zero line instead of went below. Bloomberg may have been using a dramatic flair.
Also, when it does drop below zero, the actual recession was roughly 12 to 18 months later. Thus, that occurrence, even if interpreted as an inversion, is not (yet) inconsistent with past patterns.
A recession will follow in 12-24 months, based on my understanding of the bond yield curve and close following of it in recent years. We can check in mid 2020 and see if that timeline holds.
> Prepare for the inevitable recession. It's not different this time.
This point is tautological. Of course there will eventually be a recession. No one can say when.
There are different factors in every cycle. The QE period is essentially unprecedented. The rise of tech stocks in the last 20 years is a once-in-a-century type structural change in the economy.
It's fair to say the market is currently closer to the top than the bottom and above the historical mean and a reversion to mean is inevitable but whether the current mode goes on for days, months or even years is anyone's guess.
[1] https://www.bloomberg.com/opinion/articles/2018-12-03/u-s-yi...