When you hear someone say that a curve inversion 'predicts' a recession, what it really means is that bond traders are 'predicting' a Fed rate cut.
Friday's big decline hasn't sparked much of a change in investor sentiment so far.
Here's a way to fade the bond move, which I believe is an overreaction.
This yield curve inversion has been a useful leading indicator of a recession, but what really matters is whether it is a signal we can profit from.
Markets where the Russell 2000 outperforms are healthier than those where it doesn't.
Taken together they create a worrisome picture, one that can explain why it wasn't just the banks that fell on the inversion news.
The question to ponder is whether the problem Friday is a longer-term issue or not.
If the entire inversion was because everyone was horrified by domestic economic data, I'd be extremely concerned, but much of it can be explained by other factors.
While today's action isn't attractive, we were ripe for a little profit-taking.
All this dot plot tells us is that there is a large majority within the Fed that favors staying on hold.