All Clear: Recession Indicators Signal Continued Expansion and Robust Growth

The current assessment confirms a Low Risk environment with a perfect score of 0/100, indicating a robust economic expansion. All primary signals are converging on a message of stability, with the recession probability model sitting at a negligible 0.8%. While some labor market cooling is evident, the broader macro picture remains firmly in expansion territory as of the March 2026 release.

The Sahm Rule currently sits at 0.27, well below the 0.50 threshold that historically signals the start of a recession. Although the value increased by 0.04 over the last month, the trend remains non-threatening to the current expansion. Claudia Sahm has recently noted that while the rule is a reliable historical guide, unique post-pandemic labor dynamics may require a higher bar for alarm. For now, the labor market is cooling toward a soft landing rather than a collapse.

The 10Y-2Y yield curve spread is currently at 0.56%, maintaining a healthy normal status. This positive slope is a significant departure from the prolonged inversion periods that typically precede economic contractions. Historically, a re-steepening curve after a long inversion can be a warning, but the current level suggests a stabilized interest rate environment. The absence of inversion indicates that bond markets are not currently pricing in an imminent economic shock.

Credit markets continue to show high risk appetite, with High Yield spreads remaining tight at 2.97%. Investment Grade spreads are similarly constrained at 0.82%, suggesting that corporate financing conditions are favorable. These tight spreads indicate that investors see little risk of widespread defaults, reflecting significant confidence in corporate balance sheets and liquidity.

Our analysis identified six historical periods with macro profiles similar to the current February 2026 data. In every single one of those instances, the S&P 500 was higher six months later, boasting a 100% positive hit rate. The median forward return during these periods was a robust +16.0%. This historical precedent suggests that the current low risk environment is a powerful tailwind for equity markets over the medium term.

Despite the low overall risk, recent sector performance shows a defensive tilt, with Utilities leading at +8.5% and Gold rising +2.6%. Conversely, cyclical areas like Financials and Consumer Discretionary have lagged significantly over the past month. This divergence suggests that while macro data is clear, the market may be hedging against specific policy or earnings uncertainties. Investors should note that such defensive leadership often occurs during mid-cycle pauses rather than immediate pre-recession peaks.