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Market Extra: Morgan Stanley expects the inverted yield curve — harbinger of recession — in 2019

The inverted yield curve is the Four Horsemen of the Apocalypse of the economy — investors fear them because in the past they have often preceded recessions.

Strategists at Morgan Stanley on Thursday predicted the yield curve will invert by the middle of 2019, although they stopped short of issuing a recession warning.

An inverted yield curve is where long-term yields, typically the 10-year Treasury yield TMUBMUSD10Y, -0.06% , move below short-term rates, and tends to indicate a lack of confidence in the economy in the near term. The spread between the two durations has steadily narrowed this year, in part because of the Federal Reserve’s move to hike interest rates in keeping with its effort to normalize monetary policy.

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