Here's some good economic news I missed a few weeks ago. The yield curve, which is a fairly reliable indicator of recession when it's inverted (i.e. below zero), is now positive:
But now the bad news:
As you can see, the last four recessions started a few months after an inverted yield curve returned to positive territory.¹ We're not out of the woods yet.
¹The yield curve really did invert in 2019, but it was only for one week.
If a recession does happen, it’s going to be far more likely because the Trumpy ownership class pouts after he loses the election, and decides to take their ball (capital) and go home. The Masters of the Universe are nothing but a bunch of whiny babies when they don’t get 100% of what they want.
+1
+2
There weren't any woods.
The elections did just pump billions into the economy, though mainly in swing states. The rich got it from the hordes of cash their sitting on, so more money in circulation which helps the economy. The poorer contributors may have cut back a bit somewhere else, so no net economic benefit.
After the election, the cash from billionaires will keep working its way through the economy. The poorer people can go back to spending money on more normal things. I'm guessing this will stave off any recession for a little bit and make it milder (if we have one).
Please, I've heard this trope about an inverted yield curve for years and it's simply wrong. The yield curve is fundamentally derived form what markets think the Fed is going to do with interest rates. Short term rates historically are more variable because of short term shocks, and markets recognize that the Fed will change rates in the short term to reduce economic fluctuations irrespective of whether those fluctuations will lead to higher than desired inflation or unemployment. But markets also expect that in the long term the Fed will try and set a "goldilocks" rate that's neither too high or too low and will help GDP growth to average about 2.5%. That means that long term rates are going to be steadier and with a term premium built in. When we have an inverted yield curve it largely is based on what markets expect the Fed to do to achieve its goals. Now if you want to argue that the Fed is driving short term rates above long term to slow the economy - and implicitly cause a recession - that's consistent with the inverted yield curve argument. But it's not consistent with the Fed's goals and it only works if/when the Fed screws up. (And yes they have on occasion but blaming most recessions on the Fed is nuts.)
Who knew that yield curves could cause a global pandemic?
I think you could state it the other way around. A recession is a predictor of a peak in the yield curve. Every time there is a recession the yield curve peaks shortly after that and begins a long slide.
After 3 years of contradicting econometrics, maybe this time you can overcome old man stubbornness and track the Beveridge Curve.
An inverted yield curve speaks of expectations of short-term interest rates going down, which could come from fears of recession or simply from knowing that the Fed is planning to go that way. Recently it has clearly been the Fed's intention to bring the federal funds rate down.