Curve inversion state
Inversion
What it is
Qualitative diagnosis of the yield curve: normal (positive slope), in process of inverting, inverted, or in process of un-inverting (re-steepening). Each state tells a distinct macro story.
How to read it
"Normal" = healthy growing economy. "Inverting" = early warning signal. "Inverted" = recession likely within 6-24 months. "Un-inverting" = recession is imminent or starting — historically the most dangerous moment for equities.
Common reference points
- NormalStable positive slope
- InvertingRapid flattening
- InvertedSustained spread < 0
- Un-invertingExit from negative
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
Like any macro signal, not exact timing. An inversion can last 2 years before recession. And some atypical cycles (massive monetary policy, external shock) can distort the historical signal.
Other measures — Macro — rates
Educational content. Polaris is not a registered investment adviser and makes no recommendation.