The yield curve typically turns positive after Fed rate cuts. As highlighted by the asset manager, in five of the six periods since 1980, nonfarm payroll growth turned negative within 12 months (the shortest period was just one month) after the curve began to steepen, as recessions were underway.

A prominent exception, as noted by Payden & Rygel, was the 1990s. The yield curve slope turned positive after the Fed cut rates in response to Long Term Capital Management (LTCM). According to the asset manager, nonfarm payroll employment growth remained resilient, and a recession didn't happen for another three years. With this morning's jobs report showing firms added another 142,000 jobs to payrolls in August and a 25-basis point rate cut likely in September, the asset manager sees the economy tracking more like the 1990s.