DARK CLOUDS

Dow Tanks as Treasury’s Key Recession Indicator Sounds Alarm

Long-term yields have fallen below short-term yields, a unique situation known to be a sign of impending recessions.

The Dow Jones Industrial Average plummeted 800 points on Wednesday—its worst day of 2019—as investors fearing a recession drove the Wall Street bellwether 30-year Treasury bond to its all-time low yield, stoking further fears of a U.S. recession. One metric of particular concern: the 30-year Treasury note, which saw its yield fall below 2.05 percent, its lowest on record. But even such a historic mark became secondary to the news of the 10-year Treasury note’s drop, which put it below a two-year bond’s yield—a unique situation known as an “inversion-yield curve.” This particular inversion has preceded every economic decline in the U.S. for the past 60 years, making it a notorious but reliable indicator that a recession could be on the horizon. Investors and traders are now hoping the Federal Reserve will implement additional rate cuts (on top of those delivered last month). If the Fed obliges, such a move could only be a temporary antidote.