Treasury yield curve inversion and cycle model signal trouble for stock markets

Watch out: Downside risk is larger than follow-through upside gains

The following chart shows the 10 year US treasury minus the 1 year treasury spread curve in blue. The current yield curve is negative which results in an inverted yield curve. Attention is keenly focused on the yield curve slope as sustained inversions in past decades have been followed by economic downturns over the ensuing 12 to 18 months.

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