![\"US](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2026\/2026-07-31-us-snapshot.png?resize=525%2C404&ssl=1\")
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We have revised the bull-bear market leading indicator to improve its responsiveness, stripping it down to a composite of five key indicators. At present, two of the five indicators signal risk-off, indicating medium risk of a US bear market.<\/p>\n
![\"Bull\/Bear](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2026\/2026-07-31-us-bull-bear.png?resize=525%2C198&ssl=1\")
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The 10-year\/3-month Treasury yield spread has been positive for more than 120 days, and the S&P 500 is above its 12-month weighted moving average, confirming the risk-on signal.<\/p>\n
![\"Treasury](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2026\/2026-07-31-10y-3m.png?resize=525%2C404&ssl=1\")
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The new Fed Chair, Kevin Warsh, wants to eliminate Fed guidance.<\/p>\n
For Warsh, saying less is a virtue. It protects the committee\u2019s judgment. If policymakers issue a forecast, they start crediting evidence that con\ufb01rms it and discounting evidence that doesn\u2019t. He also believes a quieter Fed gets a cleaner read on what investors think about the economy, rather than hearing an echo of its own guidance. Investors \u201care upset with me already that I\u2019m somehow not feeding them all the information they\u2019d gotten before,\u201d he told lawmakers. (WSJ<\/a>)<\/p><\/blockquote>\n
Warsh’s tight-lipped approach will likely fuel greater bond market volatility, driving up long-term yields. A steeper yield curve would restrict demand growth and help to curb inflation.<\/p>\n<\/div>
\nThe 10-year\/3-month Treasury yield curve has reliably inverted before every recession since 1960, with two exceptions:<\/p>\n\n
- In 1966, the yield curve inverted, the S&P 500 fell 22%, and the NBER declared a recession. However, the NBER later changed its mind and airbrushed the recession from its history.<\/li>\n
- A steep yield curve inversion took place, lasting from November 2022 to November 2024. The Fed hiked interest rates steeply in 2022 after keeping the fed funds target rate (lower bound) at zero for almost two years during the COVID-19 pandemic. However, Treasury Secretary Janet Yellen increased the issue of T-Bills, flooding financial markets with liquidity to counter the effect of rate tightening. At the same time, the Fed ran down its reverse repo facility, injecting more than $2 trillion to achieve the same ends. Treasury also introduced debt buybacks \u2014 replacing illiquid “off-the-run” securities with new liquid issues \u2014 to reduce bond market volatility and improve liquidity. The combined weight of these exceptional measures helped the economy to avoid a recession.<\/li>\n<\/ul>\n