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this relationship holds not only in the United States but also for a number of other advanced economies (Estrella and Mishkin 1997). The term spread is one of the most reliable predictors of future economic activity among a wide range of economic and financial indicators 

 The delay between the term spread turning negative and the beginning of a recession has ranged between 6 and 24 months

So act quickly

 allowing the level of interest rates to have a separate effect from that of the term spread—shows that only the difference between these interest rates, the term spread, matters for recession predictions.
Personally I believe that toady’s world is not only safer than the world of 50 or more years ago but that capitalism and the on-rush of innovation has resulted in deflationary pressures and lower natural interest rates,. This increases the return gap between equity and bonds. But will not stop recessions, a natural cleansing process of the system.

This result is robust to using a number of alternative estimates of the term premium in the predictive models. like similar results in other countries, this is a strong bit of evidence that this effect is not some statistical fluke . Keeping in mind that the number of recessions is itself a small number
For a fall in stock price we do not not need a recession, a well publicized threat of one or just a noticeable slow down is enough to crater equity prices.
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