when the yield curve flattens

In moderation, a little inflation is not all that bad — as the Fed reminded us when it was still worried about deflation. Inflation can boost sales, profits, employment and incomes, thus giving the recovery a needed lift.

Too much inflation can be problematic, for reasons you well know. To keep inflation from getting out of hand, the Fed will start tightening up, boosting short-term rates in the process.

The yield curve will then begin to flatten. Once it inverts — when short rates go above longs — that’s when it’s time to bail out of stocks, and prepare for the next recession