Lutey Recession Indicator Applied to March 2025
Yield Curve Inversion + MA Crossover
SP 500 observed a moving average (MA) crossover of 21 day and 200 day moving averages on the daily index around March 25, 2025. Prior to this, interest rates were inverted for most of 2023 and 2024.
In this case, the relevant inversion period (272 days before MA crossover) begins on March 4, 2024. You would remain out of the market for the entire duration of that inversion and continue to stay out if the MA crossover is still active or if new rate inversions occur.
The rate inversion began on March 4, 2024, and persisted until December 2024. Since then, the yield curves have been intermittently inverting. This means you should monitor both the 1-year/5-year and 1-year/10-year yield curve inversions, along with any new ones that may arise.
The rates resumed to normal for 49 days starting 12/13/2024. So monitor the market for the length of the moving average crossover or a second moving average crossover if the moving average resumes to normal.
The rule is as follows: when rates are inverted for 3 consecutive months look for a moving average crossover. Then stay out of the market for as long as either (1) the MA crossover remains valid, or (2) rates were inverted starting from 272 days before the crossover.
The current state would be to stay out of the market following the moving average crossover signal or 197 days starting when the moving average crossed over.
Lutey Recession Indicator will monitor the state of the market and post an update after the 197 day consecutive rate inversion period is over and follow either any new moving average crossovers that have occured then or new rate inversion periods until no rates are inverted or moving averages are crossed over.
