Summary

The 10-year Treasury yield has fallen below the 3-month note, creating an “inverted yield curve” that the Federal Reserve considers a reliable recession indicator.

This shift occurred as yields tumbled since Trump’s inauguration, with investors concerned his tariff policies could spike inflation and slow growth.

Consumer sentiment surveys show increasing anxiety about inflation, with the University of Michigan reporting five-year inflation expectations at their highest since 1995.

Despite these warning signs, economists remain divided on recession likelihood, noting that while bond markets signal caution, the labor market remains strong without the job losses typically associated with recessions.