Recession Risks Are Piling Up And Investors Need to Get Ready
Bond yields, price crunch and Fed pivot point to a downturn
Strategists and fund managers offer insight on how to prepare
Summers Says Biden 'Wrong' to Blame Inflation Surge on Putin, Greed
WATCH: Former Treasury Secretary Lawrence Summers says the Biden administration is “wrong” to put the emphasis on Russia’s invasion of Ukraine and on price gouging as causes for the surge in U.S. inflation.Source: Bloomberg
By
Nikos Chrysoloras,
Jess Menton, and
Thyagaraju Adinarayan
March 12, 2022, 2:30 AM
Even after one of the worst starts to an equity trading year in history, the market upheaval might just be getting started.
Ominous signs are piling up that more turmoil is still coming, as key indicators point toward a potential recession. That could deepen the market rout triggered by the Federal Reserve leading a hawkish shift among central banks and war in Ukraine.
The U.S. Treasury yield curve has collapsed to near inversion -- a situation when short-term rates exceed those with longer tenors, which has often preceded a downturn. In Europe, energy costs have climbed to unprecedented levels, as sanctions against Russia exacerbate a global commodity crunch.
Gap between short- and long-term yields has tumbled near recession level
“Over time, the three biggest factors that tend to drive the U.S. economy into a recession are an inverted yield curve, some kind of commodity price shock or Fed tightening,” said Ed Clissold, chief U.S. strategist at Ned Davis Research. “Right now, there appears to be potential for all three to happen at the same time.”
Food prices are already past levels that contributed to uprisings in the past, and the outbreak of a war between Russia and Ukraine -- which combined account for 28% of global wheat exports and 16% of corn, according to UBS Global Wealth Management -- only adds to risks.
Meanwhile, the Fed is unlikely to intervene to prevent sell-offs, according to George Saravelos, Deutsche Bank’s global head of currency research. That’s because the root cause of the current spike in inflation is a supply shock, rendering the playbook used to fight downturns for the past 30 years all but useless.
The probability of a U.S. recession in the next year may be as high as 35%, according to economists at Goldman Sachs Group Inc., who cut the bank’s growth forecasts due to the soaring oil prices and the fallout from the war in Ukraine. Bank of America Corp. said the risk of an economic downturn is low for now, but higher next year.
With a sharp and widespread economic slowdown looming over the horizon, here’s a guide on how to prepare based on conversations and notes by fund managers and strategists.
https://www.bloomberg.com/news/arti...are-piling-up-and-investors-need-to-get-ready
Bond yields, price crunch and Fed pivot point to a downturn
Strategists and fund managers offer insight on how to prepare
Summers Says Biden 'Wrong' to Blame Inflation Surge on Putin, Greed
WATCH: Former Treasury Secretary Lawrence Summers says the Biden administration is “wrong” to put the emphasis on Russia’s invasion of Ukraine and on price gouging as causes for the surge in U.S. inflation.Source: Bloomberg
By
Nikos Chrysoloras,
Jess Menton, and
Thyagaraju Adinarayan
March 12, 2022, 2:30 AM
Even after one of the worst starts to an equity trading year in history, the market upheaval might just be getting started.
Ominous signs are piling up that more turmoil is still coming, as key indicators point toward a potential recession. That could deepen the market rout triggered by the Federal Reserve leading a hawkish shift among central banks and war in Ukraine.
The U.S. Treasury yield curve has collapsed to near inversion -- a situation when short-term rates exceed those with longer tenors, which has often preceded a downturn. In Europe, energy costs have climbed to unprecedented levels, as sanctions against Russia exacerbate a global commodity crunch.
Gap between short- and long-term yields has tumbled near recession level
“Over time, the three biggest factors that tend to drive the U.S. economy into a recession are an inverted yield curve, some kind of commodity price shock or Fed tightening,” said Ed Clissold, chief U.S. strategist at Ned Davis Research. “Right now, there appears to be potential for all three to happen at the same time.”
Food prices are already past levels that contributed to uprisings in the past, and the outbreak of a war between Russia and Ukraine -- which combined account for 28% of global wheat exports and 16% of corn, according to UBS Global Wealth Management -- only adds to risks.
Meanwhile, the Fed is unlikely to intervene to prevent sell-offs, according to George Saravelos, Deutsche Bank’s global head of currency research. That’s because the root cause of the current spike in inflation is a supply shock, rendering the playbook used to fight downturns for the past 30 years all but useless.
The probability of a U.S. recession in the next year may be as high as 35%, according to economists at Goldman Sachs Group Inc., who cut the bank’s growth forecasts due to the soaring oil prices and the fallout from the war in Ukraine. Bank of America Corp. said the risk of an economic downturn is low for now, but higher next year.
With a sharp and widespread economic slowdown looming over the horizon, here’s a guide on how to prepare based on conversations and notes by fund managers and strategists.
https://www.bloomberg.com/news/arti...are-piling-up-and-investors-need-to-get-ready
