The U.S. Treasury yield curve has lost its forecasting power and investors wanting to divine the possibility of a U.S. recession should turn to a little-known equation from the 1970s.

That’s the recommendation of Morgan Stanley economist Ellen Zentner, who told clients in a Nov. 18 report that the Federal Reserve’s near-zero interest rate and asset-buying is holding down U.S. bond rates. That means the yield curve would struggle to invert, crimping its effectiveness as an indicator of business cycles, she wrote.

An inversion occurs when three-month bill yields top those of 10-year notes, signaling investors are betting on weaker economic growth. Recessions have followed six of the eight times that’s happened since 1960; there hasn’t been a U.S. recession that wasn’t preceded by an inverted curve in the period.

An ideal leading indicator would exclude components such as the yield curve that behave perversely during times of financial stress, said New York-based Zentner. She suggested investors look at the Duncan Leading Indicator, devised in 1977 by Wallace Duncan, then of the Federal Reserve Bank of Dallas.

The DLI looks at components of the U.S. economy that react to cyclical demand, such as household spending, and compares them with economic growth. If these factors grow faster than final demand, a peak should precede a decline in activity.

Since 1970, the DLI has indicated imminent downturns by an average of four quarters. A 1985 study by the Federal Reserve Bank of San Francisco found it a more reliable indicator of business cycle peaks than other tools.

An upturn in the DLI since the second quarter of 2009 confirmed the end of the last recession and its subsequent gain over the past 17 quarters indicates the risk of an economic slump next year remains low, Zentner said.