Recession on deck?

Good Morning,

With the market currently being in a downward trend, the question of a recession has been more prevalent within the news. One of the leading indicators used to determine if we are heading into a recession is based upon the inversion of the yield curve. Bloomberg wrote an article late last week about this topic and a couple main takeaways were:

1. To entice people to buy longer-dated bonds, interest rates must be higher. The issue comes when short-term rates are higher than longer-term rates, which creates an inversion of the yield curve
2. Recessions usually begin 6 to 24 months after the yield curve inverts
3. The yield curve right now is normal and not inverted

While the yield curve isn't inverted, there are other leading indicators which are pointing toward an economy that is starting to inch down that hill. A couple of the other leading indicators which have been experiencing problems are:

1. Housing starts (building permits, new private housing starts)  have slowed down (real estate market)
2. The Stock Market has experienced a rocky past couple of weeks which have eaten away from the beginning of the year gains

Some indicators remain at all time lows (new unemployment claims), while others such as Consumer Expectations are at all-time highs. Overall the this is a mixed story, but based upon everything that is going on currently we could easily see unemployment start to tick up along with Consumer Expectations decrease if companies become even more cautious with their tone.

The underline message from the Bloomberg article and extra information provided is that we are probably not in a recession based on some of the data points, but only time will tell.

#financialliteracy #bloomberg #yieldcurve #leadingindicator #recession #unemployment #consumersentiment #fed #bonds #bondmarket #stocks #stockmarket #financialfloyd #phillyfinance


https://www.bloomberg.com/news/articles/2018-11-16/don-t-take-your-eyes-off-the-yield-curve

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