Since the beginning of this year, broad equity price indexes around the world have declined significantly. In interpreting the declines, market commentaries have highlighted the risks to the economic outlook in the United States and other advanced economies

An inverted yield curve—defined as an episode in which long-maturity Treasury yields fall below their short-maturity counterparts—is a powerful near-term predictor of recessions. While most previous studies focus on the predictive power of the spread between long- and short-maturity Treasury...