Even Reliable Market Indicators Have Their Limitations

Despite numerous economic and financial market indicators continuing to flash recession, stocks marched further into record territory last week. The S&P 500® closed above 5,200, while the Dow Jones flirted with the high-water mark of 40,000. 

The current market cycle has defied conventional norms and time-tested signals, such as the inverted yield curve, which forewarns of a recession. The yield curve is considered inverted when interest rates on shorter-term debt securities exceed the rates on longer-term debt securities. This indicates investors are more averse to risk, fearing a recession or economic slowdown.