That chart is tracking the Yield Curve and pointing to an inversion of the 2 and 10 year Treasury yield as a recession indicator.
Fair enough. Lots of economists and psudo-economists (economic podcasts love to talk about the yield curve) use it as an indicator. It's not the only one though.
Typically, the longer an institution borrows your money, the less chance you'll be paid back, the higher the risk, the more interest (the yield) the bond pays. The yield curve should look just like that: A curve. Short term Treasuries pay less than long term Treasuries, with each successive increase in time having a slightly higher yield. When a short term Treasury has a higher yield than a long term Treasury, this is an inverted yield curve. The idea behind it is that when a 2-year Treasury has a higher rate than a 10-year Treasury, the bond market is signaling the government will have a more difficult time repaying the bond in 2 years than in 10 years. That is, a 2-year Treasury is riskier than a 10-year.
It is incredibly disingenuous to call the brief inversion in 2020 an actual recession indicator. The general view is that the yield curve has to stay inverted for a sustained period of time. You can see the previous three inversions remained that way for at least a year and sometimes up to two years.
What does the yield curved not predict? A global pandemic, which is what caused the recession. Would the 2020 inversion blip have continued for a sustained period of time and become an actual recession indicator? Maybe.
It's even more crazy when you look at how the yield curve reacts in relation to inflation. When the bond market believes inflation is a problem, the yield curve will become steep as investors look to protect their investment against long term inflation. That is the opposite of what is happening right now. When the yield curve flattens (the extreme being an inversion), the bond market believes inflation is not going to pose a long term issue.
There's an indicator for you: Current bond pricing is indicating inflation will not remain a problem.