That's absolutely not the case The Yield Curve is now talked about on nightly news shows and it used to be only known about by economists and people in finance.
It's completely legitimate to question whether this increase in publicity for this one metric might be causing it to be less useful.
I just went and fact-checked myself via Google Trends.
It does seem like the term had similar amount of web search traffic in late-2005 across all categories, compared to now. I didn't expect that at all. However, "News Search" only goes back to January 2008, so it's difficult to tell if 2005 also had similar news coverage. But the graph since 2008 definitely shows a massive increase:
So I think I might be mostly wrong. (Of course, this wouldn't mean there's no observer effect... just that it would be at least partially baked-into our current understanding of how it works.)
Edit: Hm. This seems to change a lot depending on the specific term used. "Yield curve inversion" makes it sound like people only started searching for this term in the last few years, and not really back in 2005. But changing it to "Yield curve inverted" shows the 2005 spike again.
So now I'm just discounting Google Trends as a source, either way.
You were asking a totally reasonable question and I gave a needlessly curt & unhelpful response. Especially considering I heard "yield inversion" and its variations literally like an hour before I commented.
Probably not. Normal people have little impact on the bond market, most of them accept market rates through some intermediary such as a bank or broker.
It's the professional investors & monetary policy makers who really matter here, as they are the ones performing economic analysis on what rates should be.
Something can both be a historical pattern and popularized as something we pay attention to. There are also historical patterns that many people don't talk about frequently or pay attention to.
Aside from that, I'm not sure how you're so confident that there is no observer effect. Markets, particularly in the short term, are influenced by human perception and emotion. It is plausible to me that, in particular, the stock market could dip because everyone observes the yield curve inversion, gets nervous about a coming recession, and then moves money out of the market in fear of it. This could happen even if a recession does not, and I don't find it impossible that such a move could help contribute to an actual recession. Again, human perception is an enormous component of markets, and perception is influenced by emotion.
