The ongoing trade war with China has caused numerous economists to panic over where the global economy is going. This article addresses a rarely seen positive outlook, keying in on the yield of treasuring bonds. The past few weeks there was a prediction of a recession because in the month of May there was an inverted yield curve, which makes short term investment more profitable then long term. This has since corrected itself, finally providing a positive sign. How important do you think that this really is? Also, does this help put to rest the idea that a recession is coming?
https://thesunbest.com/rising-yields-quiet-bond-markets-key-recession-alarm/
The correction of the inverted yield curve over the last week is not necessarily a sign that we are out of the water in terms of a looming recession. It definitely is a positive that it has improved so significantly, but with historic trends, we are due for a small recession or economic slow down. Until the trade war with China is resolved I think it is too early to determine whether or not this change is here to stay, or if it was a short glimmer of hope related to the upcoming holiday season.
ReplyDeleteI think while this is surely a positive sign, we are definitely not out of trouble as far as a recession is concerned. Due to how business cycles work, we are bound to hit a recession sooner rather than later; we need to come up with economic measures that will ensure that we do not get hit too bad and that the recession is a short one. One thing I will say though; the fact that the Fed is slashing interest rates even when unemployment is low is a very worrying sign for as it makes no economic sense at this point with how the economy is doing.
ReplyDeleteThis sign is important in the fact that investor activities are shifting back to represent a little more risky appetite. The inverted yield curve was a result of investors flocking to plant their money with short term treasury bonds that carried far less risk than longer term bonds. Perhaps the Fed has put somewhat of a reversal on this behavior with heavy tax cuts. I don't think the un-inversion shows that the economy is in the clear of a recession but it does pose as a good sign.
ReplyDeleteA strong jobs market, a healthy consumer sector, which contributes to 70% of gross domestic product, and lower rates should help the U.S. economy deliver near-trend growth this year and next. In addition, it is expected the Fed will likely deliver two to three additional 25 basis point rate cuts this year, helping to stabilize growth. With that being said, the U.S. seems to be at low risk for another Recession in the near future.
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