Can the yield curve still predict recessions?

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• 00:01

  NPR.

• 00:11

  Predicting the economy has often been compared to the finance version of astrology, or tarot on news channels.

• 00:18

  You've got the high priests of finance brought in to prognosticate and speculate and.

• 00:24

  Bloviate, pontificate and extrapolate and gesticulate, and they're often wrong.

• 00:30

  But you know, one high priest has been right.

• 00:33

  My name is Campbell Harvey.

• 00:35

  I'm professor of finance at Duke University.

• 00:38

  And Campbell's instrument for divination, the inverted yield curve.

• 00:43

  We've been covering the inverted yield curve for years on the indicator, former co host Cardiff Garcia was particularly enamored.

• 00:51

  I am kind of obsessed with the yield curve.

• 00:53

  I find it fascinating.

• 00:54

  I find it mysterious.

• 00:56

  It is one of my favorite indicators.

• 00:58

  An inverted yield curve just means that short term interest rates are higher than long term interest rates, and historically that's meant economic pain is coming.

• 01:09

  Campbell Harvey discovered this powerful indicator decades ago, and it's predicted every recession since 1969.

• 01:16

  Importantly, it also does not have a.

• 01:20

  False signal until possibly now.

• 01:26

  The yield curve inverted almost two years ago.

• 01:29

  We were on the lookout for a possible crash in the economy, but still no recession has emerged, and that is.

• 01:37

  Obviously great for America.

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