A trend in the bond market that has a long history of foreboding accuracy has kindled talk of a recession, but it could be a long conversation.
Current conditions suggest little danger of a significant economic downturn. Consumers and business owners are confident, corporate profits are soaring and the unemployment rate is headed toward the lowest level since the mid-20th century.
One danger looms, though: the ever-growing possibility that the 2-year Treasury note yield soon could be higher than its 10-year counterpart, a condition known as an inverted yield curve which has accurately predicted each of the last seven recessions, including the devastating one that began in 2007.
In Monday trading, the spread was 26 basis points (0.26 percentage point) and was near the lowest point since July 2005.
While chatter has increased around Wall Street that it's only a matter of time before the curve inverts, markets have held up fairly well during the yield compression and some economists think recession fears are premature.
"The expansion is now the second longest in US history and will become the longest if it survives another year. So far, the odds look good," Goldman Sachs economist David Mericle said in a note to clients. "We see the popular thesis that a recession is coming in 2020 as a bit hasty."
That analysis, of course, does not even address the possibility of a 2018 or 2019 recession, which in itself is noteworthy.
Typically, an inverted yield curve leads a recession by about a year. Assuming the inversion happens over the next several months, its impact at the least is likely to be delayed.