This Bond Market Alarm Has Predicted Every Recession Since 1969. Here's What It Says Happens Next in the Stock Market.

The stock market had a great year in 2023. The benchmark S 500 (SNPINDEX: ^GSPC) soared 24%, the blue-chip Dow Jones Industrial Average (DJINDICES: ^DJI) climbed almost 12%, and the technology-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) skyrocketed 43%. Those gains were fueled in part by stronger-than-expected economic growth.

What made that performance surprising was that countless pundits were expecting a recession, citing elevated inflation and rising interest rates as headwinds to spending. But that recession never happened. In fact, the U.S. economy expanded 2.5% last year, topping the 10-year average of 2.3%, according to the U.S. Bureau of Economic Analysis. But the risk of recession has not disappeared.

Analysts at JPMorgan Chase believe spending could falter this year as the full impact of higher interest rates percolates through the economy. As evidence, they point to rising delinquencies on consumer credit and signs of financial stress across younger households. The bond market supports that concern. Specifically, the Treasury yield curve has predicted past recessions with remarkable accuracy, and it's currently sounding an alarm.

Continue reading

Source Fool.com