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The most-watched recession indicator
The 10Y-2Y Treasury spread turning negative has preceded every US recession since 1969 with only one false positive (1998). The lag between inversion and recession onset has ranged from 6 to 24 months.
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Every recession was preceded by inversion, but not every inversion leads to recession (1998 was a false positive). The base rate is roughly 85% — high but not certain.
The median lag between first inversion and recession onset is approximately 14 months. Equities have typically rallied 10-15% AFTER the inversion before eventually declining.
Historically, the recession tends to begin after the curve UN-inverts (steepens back to positive), not while it remains inverted. The un-inversion is the more actionable signal.
Selling at inversion has historically meant missing 6-18 months of gains. The correct response is to review fixed income duration and stress-test portfolio resilience.
First inversion is a planning signal with a long fuse — equities have typically kept rising for months afterward — so use the window to review fixed-income duration and stress-test how the full portfolio would behave in a recession scenario, rather than cutting equity exposure the day the spread turns negative.