So much has been discussed about the power of the yield curve and how it affects the economy. It stands to reason when an inversion occurs the economy is likely to slip into a recession - eventually. Some have argued the facts that after a yield curve inversion a recession may occur up to two years later. In between those two landmarks the stock market has actually performed well, mostly in the double digits.
So why are so many worried about a recession now? It's been more than 10 years since the last one, which was a doozy (2008/09). The standard time has been about every five years so we are due. But like in California where we have earthquakes all too often, the 'big one' has yet to arrive as so many have tried to predict it. While we know a recession is going to happen 'some day', it makes little sense to try and time it. This is not about stocking up the basement and/or bomb shelter with enough food or water to last for a year or more.
This is a normal part of the cycle. What is worrisome though is many are not prepared for the hardships to come. Many people have elevated debt, upside down mortgages, spend out of their means and are complacent about their jobs. A recession is serious, where many jobs are lost, businesses fold and the economy contracts.
There is nothing positive from it. It could last months or years. Even now many industries and workers have not recovered from the Great Recession in 2008. Job losses can pile up and cause a swirl downward in the economy. Deflation becomes a huge problem, and no doubt the misery will spread to the rest of the globe. Perhaps the Fed is worried about it, they cut rates last week and now the curve has flattened out a bit.
But, if you're looking at the bond market to predict it, you'll have to wait around a bit longer for that event.