The chart above show the US 10Y - US 2Y yield (the red line) and the black line is the S&P 500 index.
When the US 10Y - US 2Y yield returns above the zero mark. After having inverted, been below zero percent. We see a larger reaction to the downside in the S&P 500 index. We have seen the US 10Y-2Y yield cross below zero in 1989, 2000, 2006 and in 2022-2024. From the cycles we can see the the inversion bottomed exactly as expected in June 2023 and the inversion between the US 10Y and US 2Y yield has become less deep, but it still hasn't broken back above the zero mark indicating a return to the 2.64% mark, which has been the minimum seen after each normalization from an inversion.
Once the zero mark is regained we should also expect a larger correction in the S&P 500 to be seen.
We are not quite there yet, but it will not take much to force a break back above the zero mark indicating a larger correction in the S&P 500 taking place and a return to the 2.64% mark for the US 10Y - US 2Y yield.
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