What about the yield curve?

In short, this condition has been achieved one or two years ahead of each of the last 7 recessions. I wonder to what degree Trump expectations drive this inversion.

What do economic prospects look like for the next year or two in your areas? In Tucson I have a feeling the latest round of construction will have finished and we will be approaching a lull.

That curve was inverted for almost the entire quarter. It says that the market thinks there is going to be a downturn…and soon.

While the yield curve inversion does tend to precede recessions, it doesn’t seem to be causal and other circumstances matter. In this case, the yield curve is inverting but spreads between high yield, investment grade corporates and treasuries are tightening, rather than blowing out. A yield curve inversion with widening spreads would be a strong recession signal.

Also, look at global credit markets… There $13 trillion worth of debt out there trading at negative yields, meaning that lenders pay the borrower. This suggests a world awash in liquidity, which is not recessionary.

Or, I’m just wrong and the obvious fear of global deflation will, in fact, lead to a recession within the next two years. It’s a possibility, but not one I can bring myself to sell my stocks over just yet.

Its awash with liquidity, but if people are stuffing their mattresses with it for fear of the banking system…that’s not a good signal either. There is lots of liquidity but no one wants to invest it…that’s why its liquid in the first place. People sitting on cash (or T-bills)

Yes, I agree. All the liquidity in the world doesn’t matter if people won’t deploy the money. But in the post QE age, any central bank can instantly cut rates to zero and start buying financial assets (QE) to prop up capital markets against a recession. If central banks then collaborate with governments, as they do during populist moments, they can helicopter money into the real economy as well.

I guess I suspect there’s a robust “plunge protection team” at work here.

I think that’s the lesson of the 2008 crash. While the Fed was able to prop up the banks, the shortfall in fiscal stimulus and the failure of Republicans to play ball caused a lot of needless pain. Monetary stimulus only gets you so far. It’s the fiscal part that helps Main St, and we failed badly on that last time.

The recession indicator (for the US) went positive the other day when the House ordered the minimum wage be raised to $15 per hour.

The problem was global. The public lost faith in banks, especially since it was caused by an asset price crash induced by the supreme bankers the FOMC. They need to repeal McCain’s indemnity for bankers and start putting people in jail. That will restore faith, in part.