A critical bond market indicator is flashing red, reigniting fears of a potential stock market collapse. The yield differential between the 10-year U.S. Treasury bond and three-month Treasury bills, often dubbed as one of the most reliable recession predictor, recently switched from negative to positive territory.

Historically, this rare shift has been a harbinger of sharp market declines and economic downturns.

"The most widely followed yield curve has just un-inverted. This is quite a rare signal that's almost perfectly predicted every recession in modern history," Bravos Research wrote in a Monday newsletter to subscribers.

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