By Matthew Kerkhoff
If you were to compile a list of the most effective recession predictors, the term spread, or difference between short and long-term interest rates, would likely be at the top of that list.
This is because the term spread (also known as the slope of the yield curve) has an uncanny ability to predict economic slowdowns. Over the past 60 years, every recession we’ve experienced has been preceded by an inverted yield curve. Not only that, a negative term spread has ALWAYS been followed by an economic slowdown – even if it did not result in an official recession.