A global recession is on the horizon - please read OP for mod warning

Below is a yield chart predicting it’s still to come. The idea is that various treasury bonds with different timeframes have a relationship to how the market is placing bets on bonds.

When the relationship is above 0, it means that things are normal, when below it should mean a recession is coming and trading has changed to reflect reduced sentiments.

There's also a relationship to how banks in the past made money by trading against bond spreads in a process called bond arbitrage as a method of expanding capital liquidity, but that stopped mattering since the 2008 crash and we've spent most of the time in QE. We'll come back to that.

Basically, not only would the yield curve inversion represent broad investor sentiment and positioning, but also could cause liquidity problems for banks in the past.

One fun fact is that the economist who created this indicators thinks there's a chance that it could be sending a false signal.

https://www.marketwatch.com/story/bond-market-recession-indicator-may-be-flashing-false-signal-says-pioneering-yield-curve-researcher-11671560339

He describes the method basically being that the creation of the signal has changed behavior, reinforcing and creating self-fulfilling prophecies, and that you don't necessarily get from there to a serious recession.

I also think that QE/QT are a factor. The Fed buying up and now letting bonds roll off/not buying more is influencing the yield, because yield is in part a product of the supply of bonds influencing the auction. Basically, by changing the patterns of the bond market, the Fed has created a circumstance where you can't know if investor sentiment is changing and as such influencing the yield for different bonds at auction, or if it's fluctuation from QE/QT changing the dynamics of the underlying market.

Where the bank liquidity situation comes in, is that the Fed is doing QT expressly because banks are flush with cash. Bond arbitrage is no longer necessary for banks to remain cash flush, the Fed is serving that purpose now. So one possibly recessionary cause tied to the relationship may no longer matter as much.

The next question is whether that creates a full recession on its own, or not. No one really knows the answer to that. Truth is we'll only know if a recession doesn't materialize. If one does materialize, the oscillator will continue to be called 100% accurate regardless of whether it was the dog wagging the tail or the tail wagging the dog.

It is, however, an effective tool for detecting market pullback risk, though, just maybe not a recession or a crash. By the way, other yield curve relationships don't test out as well. There's a little "looking for confirmatory data bias" in this oscillator.

I hope that makes sense to you, however I suspect it’s way over your head (no offence.)