Some of us believe it’s here ALREADY…..
This while the Federal Reserve is in the process raising interest rates again….
Consumers and Business are going to be whipsawed by the resulting economic see-saw….
Wall Street’s most talked about recession indicator is sounding its loudest alarm in two decades, intensifying concerns among investors that the U.S. economy is heading toward a slowdown.
That indicator is called the yield curve, and it’s a way of showing how interest rates on various U.S. government bonds compare, notably three-month bills, and two-year and 10-year Treasury notes.
Usually, bond investors expect to be paid more for locking up their money for a long stretch, so interest rates on short-term bonds are lower than those on longer-term ones. Plotted out on a chart, the various yields for bonds create an upward sloping line — the curve.
But every once in a while, short-term rates rise above long-term ones. That negative relationship contorts the curve into what’s called an inversion, and signals that the normal situation in the world’s biggest government bond market has been upended.
An inversion has preceded every U.S. recession for the past half century, so it’s seen as a harbinger of economic doom. And it’s happening now…..
But over the past nine months, the Fed has become increasingly concerned that inflation isn’t going to fade on its own and it has begun to tackle rapidly rising prices by raising interest rates quickly. By next week, when the Fed is expected to raise rates again, its policy rate will have jumped by about 2.5 percentage points from near zero in March, and that has pushed up yields on short-term Treasuries like the two-year note.
Investors on the other hand, have become increasingly fearful that the central bank will go too far, slowing the economy to such an extent that it sets off a severe downturn. This worry is reflected in falling longer-dated Treasury yields like the 10-year, which tell us more about investors expectations for growth.