While the yield curve inversion does tend to precede recessions, it doesn’t seem to be causal and other circumstances matter. In this case, the yield curve is inverting but spreads between high yield, investment grade corporates and treasuries are tightening, rather than blowing out. A yield curve inversion with widening spreads would be a strong recession signal.
Also, look at global credit markets… There $13 trillion worth of debt out there trading at negative yields, meaning that lenders pay the borrower. This suggests a world awash in liquidity, which is not recessionary.
Or, I’m just wrong and the obvious fear of global deflation will, in fact, lead to a recession within the next two years. It’s a possibility, but not one I can bring myself to sell my stocks over just yet.