Market
These metrics examine stock market performance as an indicator of investor sentiment and economic health.
Market Performance and Economic Outlook
Market highs typically coincide with optimism, increased investment, and positive economic expectations, while market declines correlate with pessimism, reduced investment, and negative outlooks. However, stock market movements can also reflect geopolitical events unrelated to economic fundamentals.
Sustained market trends influence both corporate and consumer behavior. Market downturns particularly discourage business investment and consumer spending, potentially triggering recessionary cycles.
Recession Signal Indicators
The recession signal is time-based within the context of yield curve inversion. Historical analysis shows:
- Stock market lows typically occur approximately 18 months after yield inversion begins
- Previous recessions cluster between 15-22 months post-inversion
- Market bottoms consistently occur after yield curves normalise (revert to non-inverted status)
- Market lows always follow recession onset
- Recessions typically erase at least the previous 2 years of market gains
- Looking back two years to identify the lowest point provides a benchmark; recessions generally penetrate below this threshold