What happened last time? › Combinations
What happens when the yield curve is inverted and unemployment is rising?
It has happened 4 times since 1976. A year after it began, the S&P 500 was up 2 of 4 times, with a median move of +6.0%. On an ordinary day in the same years the median was +11.6%, up 78% of the time.
10y minus 2y Treasury below 0 · Unemployment rate up more than 0.5 points over a year. Not true on 2026-09-25.
What came next
| 1 month later | 1 year later | 3 years later | |
|---|---|---|---|
| S&P 500 | +0.5% 50% up · n 4 · normal +1.2% | +6.0% 50% up · n 4 · normal +11.6% | +31.8% 100% up · n 3 · normal +34.0% |
| Gold | +0.9% 50% up · n 4 · normal +0.2% | -14.5% 50% up · n 4 · normal +5.3% | -23.2% 0% up · n 3 · normal +12.5% |
| Oil | -0.7% 0% up · n 4 · normal +0.2% | -8.6% 25% up · n 4 · normal +1.6% | -16.6% 0% up · n 3 · normal +9.2% |
| 10-year yield (pts) | +0.25 pts 100% up · n 4 · normal -0.01 pts | +0.43 pts 75% up · n 4 · normal -0.09 pts | -0.14 pts 33% up · n 3 · normal -0.45 pts |
| Inflation, CPI y/y (pts) | -0.24 pts 0% up · n 4 · normal -0.01 pts | -2.93 pts 0% up · n 4 · normal +0.03 pts | -5.54 pts 0% up · n 3 · normal -0.28 pts |
| Unemployment rate (pts) | -0.10 pts 33% up · n 3 · normal 0.00 pts | +0.90 pts 50% up · n 4 · normal -0.30 pts | -0.10 pts 33% up · n 3 · normal -0.80 pts |
Median move after each episode began, how often it rose, and how many episodes had data. "Normal" is the same move from any trading day in the same years.
Every time it happened
- 2024-08-02 · true for 17 trading days · S&P 500 a year later: +16.7%
- 1981-12-28 · true for 120 trading days · S&P 500 a year later: +15.1%
- 1981-06-05 · true for 1 trading day · S&P 500 a year later: -16.7%
- 1980-09-12 · true for 160 trading days · S&P 500 a year later: -3.1%
- 4 separate episodes: a new one starts after 30 days without a match, so one long selloff counts once.
- Few episodes: read the ranges and the interval, not just the median.
- Try enough situations and one will look like an edge by chance.
- Macro numbers are as published at the time. Stocks include companies that later died.
- How these numbers are made.
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- What happens when oil rises 50% in a year and inflation is above 5%?
- What happens when the VIX is above 40 and the Fed has just cut?
- What happens when gold rises while stocks fall?
- What happens when bond yields jump and stocks fall?