Flattening yield curve spooks markets — Here's what three experts say that means for investors 2:22 PM ET Tue, 4 Dec 2018 | 03:33

Having said that, he finds the flattening of the curve that he watches to be increasingly worrisome.

When that curve flattens or inverts, a recession is anywhere from nine to 15 months away, with the average lead time of one year.

Before Tuesday, the last time I spoke to Estrella the difference between the 10-year and 3-month Treasurys was around 90 percentage points, or nine-tenths of one percent.

As of Tuesday, however, it had narrowed even more noticeably, down to under one-half percentage point. That leads Estrella to say he is more nervous about the yield curve's message now than he was several months ago.

If the Fed continues to raise short-term rates beyond December, Estrella says that an inversion of this spread would be virtually guaranteed. And that is a very bad omen for the economy.

He agreed with my assessment that the stock market declines in tandem with, or just after the curve inverts, but before a recession actually begins.

That process may be playing out right now before our very eyes, assuming the Fed keeps hiking rates and economic indicators continue to weaken.

Most assuredly, the uncertainties surrounding the on-going trade war with China are of concern to him, as are indicators of global economic weakness.

All Treasury curves of note have flattened considerably, one has even inverted. That has sparked a lot of discussion about the implications for both Main Street and Wall Street.

There is no way to take our eyes off this ball for weeks to come. It could be strike three for the 2019 economy.