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 Reading the recession tea leaves
» Posted by Martin Weil on October 31, 2006
Calculated Risk provides this telling graph demonstrating how residential real estate investment (red line, now falling dramatically) is a good leading indicator of recession in the US. Perhaps the current period will be an exception, as in 1951, 1967 and 1995. But the track record of the indicator speaks for itself. Research on another front also suggests that it may not only be the size of a yield curve inversion (my preferred recession weather vane) but also the duration of the inversion that counts. The yield curve, while still only modestly inverted when measuring the 10-Year minus the 3-Month Treasury spread, has been that way since early 2006, a clear danger sign according to this emerging research.
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