The Yield Curve is Sending Out a Genuine Recessionary Warning 

The Bullish Case-

Low interest rates justify high valuations and there is no alternative to stocks.

The Bearish Case-

We have the greatest two-year yield, highest three-year yield, and generally the highest five-year yield in the last year. 

As a result, the yield curve is sending out a genuine recessionary warning. 

You have interest rates going up at the short end and falling down on the long end … the basic flattening yield curve.

As a recession prediction: markets begin to worry that the Fed raised rates too much which in turn prompts an economic downturn. 

Rates may be at this crossroads right now as the Fed tries to convert itself into an inflation fighter in the midst of a global health crisis by 1) winding down its quantitative easing (QE) program and 2) suggesting a path of higher interest rates in 2022 and beyond. 

At the end of 2021, the disparity between the 10-year and two-year Treasury yields had decreased to 79 basis points, a margin that was 160 basis points in March of last year. 

The Fed only needs to raise rates four times before you start seeing a slew of recessionary indications.