Is a US Recession Coming in 2019?

[Optional]

I keep seeing articles talking about economic indicators projecting a recession.

In particular when the "bond yield curve flips" being a pretty accurate indicator of past recessions.

Basically when short term bond interest rates rise above long term bond rates.


I'm seeing similar graphs to this repeatedly





Trump has been saying he wants the Fed to back off with the interest rate rises. I'm guessing with an eye on the bond yield curve.

But the Fed continues to say the plan remains to increase interest rates again this week, and at least a couple more times in 2019.

From what I have read this will definitely result in that bond yield flip at some point next year.



I don't really understand the competing forces here.

Putting the tin foil hat on it would be easy to look at what's going on and think the Fed is trying to push he country into recession just before the 2020 election cycle.

But if it was that obvious wouldn't Trump be attacking them? Or will be attacking if they do bump rates again this week at the very least.



If you're interested in where these ideas got into my head.

Article from June talking about it heading to a flip and why

Forbes article from September saying it's nearing a flip

A BBC article from last week saying about 30% chance of a recession in 2019

[guitarjosh]

Probably not, it can take several years for the 1 - 10 year spread to go from where it currently is to an inversion, and then even more time until there is a recession. My guess is that unless the Fed starts hiking aggressively, you won't have a recession until after the next election.

[RoyBacon]

It could signal something or it could not.

The short side of the curve is not as important as the long side and the 10yr & 30 yr have a bullish spread. The short side is far more vulnerable to very temporary conditions. Which could be flight to safety moves think British pound or even government financing.

[Optional]

Hmm, you're right, the 30-10 has actually been on the improve for a couple of months.

https://ycharts.com/indicators/30_year_treasury_rate_less_10_year_treasury_rate

"30-10 Year Treasury Yield Spread is at 0.25%, compared to 0.25% the previous market day and 0.36% last year. This is lower than the long term average of 0.52%."


6 months of economists saying it is coming can turn into a self fulfilling prophecy at some point is what mostly got my attention with noticing the same sort of articles so many times.

[khicks26]

[khicks26]

[RoyBacon]

The rates argument is a little like the tail wagging the dog. What's causing rate moves is more important than where the rates are.

The interest rate markets have suddenly began to price in a much slower economy than was priced in. Which soured stock valuations. I think that will resolve back to a strong economy and slightly higher rates in '19. The sky is actually not falling.