ABSTRACT
The Lutey Recession Indicator is designed to anticipate market recessions by tracking interest rate inversions and moving average (MA) crossover signals. The core thesis is to first wait for interest rates to remain inverted for three consecutive months and then watch for a moving average crossover on the market index. Once the MA crossover occurs, exit the market and stay out for as long as: The MA crossover signal remains active, or Interest rates were inverted within the 272 days preceding the crossover (including any new inversions during this time). Begin tracking how many consecutive days you've been out of the market. Re-enter only when: The MA crossover has resolved, Yield curves are no longer inverted, And no new inversions have started. A recent example of this signal occurred following the implementation of the Trump tariffs, which led to a market sell-off and a subsequent MA crossover. This happened after more than a year of sustained yield curve inversions between the 1-year/5-year and 1-year/10-year spreads. On March 25, 2025, we observed a moving average crossover on the S&P 500, which may signal the beginning of a new recession.
Keywords
Moving Average, Death Cross, Interest Rate Inversion, Recession Timing