White House trade advisor Peter Navarro disputed that the bond market flashed a recession signal last week, which spooked investors and sent the stock market tumbling.



The yield on the benchmark 10-year Treasury note briefly fell below the 2-year rate on Wednesday, a phenomenon in the bond market known as yield curve inversion, which is typically taken as a sign that a recession is on the horizon.

Navarro, however, disputed this: "Technically, we did not have a yield curve inversion," he said in an interview on CNN.



The White House trade advisor called it a "flat curve" because the spread was too narrow. The yield on the benchmark 10-year Treasury note dropped to 1.623% Wednesday, briefly below the 2-year rate of 1.634%.

"An inverted yield curve requires a big spread between thevery strong Trump economy," he said.

Navarro sees a bullish case for the U.S. economy this year. He said the Federal Reserve needs to embark on very aggressive interest rate cuts through the end of the year, which will lower the yield on shorter term bonds.



The Fed lowered its benchmark rate by a quarter point in July, the first cut since the financial crisis in 2008. Chairman Jerome Powell, however, said the cut was a "midcycle adjustment" and the committee did not see economic weakness that would require a longer cycle of slashing interest rates.

Powell, during his July press conference, said the U.S. economic outlook remains favorable but the Fed decided to cut rates "to insure against downside risks from weak global growth and trade policy uncertainty." He said