Eight recessions, each a grey band.
Here is the S&P 500 across the modern era, shown on a log scale — the only honest way to compare percentage moves across decades. Each grey band is one official US recession: the start-to-end dates the National Bureau of Economic Research later marked as a contraction.
Eight recessions since 1962, eight grey bands. Every one of them shows up as a stumble in the index. The question this whole report asks is simple: does anything warn before the grey arrives?
The three parts that follow each test one well-known alarm — the yield curve, a machine reading the present, and credit spreads — against this same record.
overview
A perfect record — that just misfired.
Normally longer loans pay more than shorter ones. When that flips — when the 1-year Treasury rate climbs above the 10-year, an “inverted” curve — it has historically been the single most reliable warning that a recession is coming. Every one of the eight recessions since 1962 was preceded by one.
But a perfect record hides two problems. The warning says a recession is likely — it cannot tell you when. And the deepest, longest inversion ever recorded, in 2022–24, has so far been followed by no recession at all.
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It spots a recession nine months before the official word.
The curve forecasts the future and pays for it in vagueness. A different approach gives that up: instead of guessing months ahead, a machine reads the presentmonth of the economy — unemployment momentum, payroll growth, the curve, the credit spread, consumer sentiment — and outputs one number: the chance a recession is underway right now.
We tested it the honest way: each year it was retrained only on the past and judged only on data it had never seen. It tracks recessions almost perfectly — and because the official body that dates recessions publishes with a long delay, the machine’s read of “now” lands about nine months before the press release.
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Credit prices stress — usually after it has already broken.
The bond market is supposed to be the smart money: the extra yield investors demand to hold riskier corporate bonds over safe Treasuries — the credit spread — should widen before trouble, a warning the stock market hasn’t caught yet. That is the story. The record is more sobering.
Most of the time the spread blows out duringa sell-off, not before it. Of every sharp spread spike in a century, nearly two-thirds happened when the S&P was already down 10% or more. Credit is smart money only in the rare case when it moves first; usually it is just confirming what stocks already know.
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Where we are, honestly.
This is not advice to position for, or against, a recession. It is a map of what each well-known alarm can honestly tell you — and what all three are saying right now. Observation, not advice.
A perfect record with no clock. Every recession since 1962 was preceded by an inverted yield curve — zero misses — but the lead ranges 9 to 19 months, so it says if, not when. And the deepest, longest inversion ever (2022–24) has so far produced no recession at all.
Reads the present, not the future. A model of the labor market, the curve, credit and sentiment tracks recessions almost perfectly and crosses 50% about nine months before the official announcement — but that lead is over a slow committee, not over the economy. It nowcasts; it does not forecast quarters ahead.
Smart money, but usually late. The credit spread widens during stress at least as much as before it — nearly two-thirds of spikes fire when stocks are already down 10%+. The rare spike from a calm market is a genuine warning; most are just confirmation.
June 2026: nothing is flashing. The curve has un-inverted back to a normal positive slope; the machine's recession reading is about 0.8%; credit sits calm near its 35th percentile. The honest catch — the loudest alarm just failed, so 'all clear' deserves a discount.
- —Only eight recessions since 1962 (six in the machine's test era). Every statistic here rests on a handful of events — treat the rates as directional, not precise.
- —The curve's 2022–24 misfire is real and unresolved. The deepest inversion on record has produced no recession yet, so the historical mapping may be weakening — the report leads with that tension, it doesn't bury it.
- —The machine is a nowcast, not a forecast. It reads the present month well; its lead is over the official body's deliberate slowness, not over the economy. Pushed even a quarter ahead, its skill drops sharply.
- —These use final, revised data. A true real-time test would use the messier first-release numbers, which would add noise and trim the realized lead — so the skill shown is an upper bound.
- —Credit is mostly coincident. Its only honest edge is flagging a higher chance of a deep drawdown when the spread is extreme — a risk gauge, not a timing signal. Calm credit reassures about now, not next year.
- —Descriptive, not predictive. This is a record of what has happened around past recessions; it is not a validated forecast and it sells no predictions.
Descriptive research, not financial advice. Recessions and bear markets can arrive with little warning — and the signals that usually warn have failed before, as the 2022–24 curve inversion shows.
Appendix — every chart & data inventory →