Recession chances? One major Wall Street firm says only 15% "after better-than-expected jobs report." (Reuters, Oct. 7) Yet, in Elliott Wave International's view, economic numbers are laggards and do not predict anything. Better to pay attention to this indicator from EWI's October Elliott Wave Financial Forecast:

The countdown to recession/depression is now "officially" underway. For the first time since July 5, 2022, the 2-year versus 10-year U.S. Treasury yield curve has "uninverted," as shown on the chart below.

We covered the record-long yield curve inversion in May and August. We have previously noted that since the late 1980s, the yield curve will "uninvert" before the economy starts to contract. The record-long duration of the recent inversion fits EWFF's forecast for a severe economic contraction this time. Since the stock market leads the economy, the progressing wave pattern of the major indices will be the best indicator of when the economic retrenchment begins. So far, stocks have not signaled an economic cliff-dive. The next time stock indexes drop 20%, a recession will be underway.

Get more insights into financial markets and the economy from Elliott Wave International's team of veteran analysts. Follow this link for free highlights of EWI's U.S. Stock Market coverage >>.

This article was syndicated by Elliott Wave International and was originally published under the headline Why Countdown to U.S. Recession is Underway. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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