It is not the inversion - it is the switch back to normal that signals a recession

 

There has been a lot of discussion about inverted yield curves indicating the likelihood of a recession. The curve inverts and the recession will be coming, yet this time has been different. The size of the inversion has been large and the time inverted has been long, yet there has not been a recession. 

The story has now changed. Yes, you need an inversion, but the real indicator is that the inversion moves to positive. We are now at the point of having a positive yield curve, so the recession is now coming. If you look at the data, the inversion and then a switch before a recession is all true; however, it is not clear what is the underlying story for this combination. A recession may be coming, but the inverted yield curve story just does not hold the same water as before.