The inverted yield curve and the Leading Economic Index have failed as recession predictors
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Stocks made new record highs, with the S&P 500 setting an intraday high of 5,261.10 and a closing high of 5,241.53 on Thursday. The yield curve represents the shape that forms on a chart when you plot the interest rate, or yield, for Treasury debt securities with various maturities. The yield curve inverts when a longer term rate is lower than a shorter term rate. Two years ago, the 2s10s yield curve inverted. While the inverted yield curve may have a good track record of predicting recessions, it’s not very precise in predicting when recessions will start. The Conference Board’s Leading Economic Index (LEI) — a composite of market and economic metrics — has had a strong track record of predicting recessions, specifically when its six-month average change is negative. Over the past two years, it too had been signaling a recession that hasn’t come. On Thursday, Societe Generale’s Manish Kabra raised his year-end target for the S&P 500 to 5,500 from 4,750. The Federal Reserve announced it would keep its benchmark interest rate target high at a range of 5.25% to 5.5%. Initial claims for unemployment benefits declined to 210,000 during the week ending March 16. Sales of previously owned homes increased by 9.5% in February to an annualized rate of 4.38 million units. Housing starts jumped 10.7% in February to an annualized rate of 1.52 million units. The average 30-year fixed-rate mortgage rose to 6.87% from 6.74% the week prior. Office occupancy dipped slightly this past week to 50.6%. The Atlanta Fed’s GDPNow model sees real GDP growth climbing at a 2.1% rate in Q1.

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