Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Yield Curve Is the Best Recession Indicator

Interest-Rates / Recession 2018 May 25, 2017 - 10:55 AM GMT

By: John_Mauldin

Interest-Rates

By Shannara Johnson : Every investor wishes he had a crystal ball. But there’s one thing, says David Rosenberg, chief economist at Gluskin Sheff, that has predicted imminent recessions without fail.

Speaking at the Strategic Investment Conference in Orlando, Florida, Rosenberg pointed out that since 1950, there have been 13 cycles where the Federal Reserve tightened interest rates… and 10 of them ended in recession.


Should we be prepared for another US recession in the near future? Jonathan Roth interviewed Rosenberg to get to the bottom of the issue (full video interview below).

The Yield Curve: The Best Recession Indicator

“I think what people should be focused on is the shape of the yield curve,” Rosenberg said. “[Every] single inversion of the yield curve, where short-term rates go above long-term interest rates, has presaged a recession—every single time.”

The three times where rate hikes did not lead to recessions, he noted, were due to the Fed stopping short of inverting the yield curve.

At the moment, Rosenberg suggested, “the yield curve is flat enough that if the Fed raises rates four more times, that’s all it takes. We probably will have a recession next year.”

Looking at the dot plots shows that more than 50% of all FOMC officials are ready to raise rates four more times going into 2018, so “the risk isn’t necessarily high right now, but it is rising.”

Politics Is Just Short-Term Noise

Asked about the possible economic implications of the ongoing problems the Trump administration faces, Rosenberg shrugged off the question. “Here’s what I’m going to forecast with 100% guarantee: that no matter what happens with Donald Trump, the United States will still have a president.”

He noted that the Comey affair caused all of a one-day plunge in the stock market, “so politics, to me, unless it has a substantive impact on the earnings outlook or the economy, is just short-term noise.”

The Fourth Industrial Revolution Is Underway

What’s much more important, Rosenberg said, is the supply side of the economy, an aspect that no one pays enough attention to. “What’s happening in terms of artificial, robotic intelligence and the shared economy… Right now, we’re going through the fourth Industrial Revolution, and it’s having a profound impact on worker anxiety.”

Yes, corporate tax reform is necessary, he conceded, but there are other constraints we have to deal with. For example: “How is it that we have 23 million Americans between 25 and 54, in their prime working age, that are out of the labor force?”

He surmised that “there’s some real structural things happening here that really transcend the need to cut taxes or what’s happening in terms of immigration policy.”

What Are the Implications for Investors?

There’s no doubt we are late cycle, said Rosenberg. “That means you really want to tuck it in.”

For his thoughts on what a late-cycle portfolio should look like and more, watch the full interview below.

Get Live Updates from the Sold-Out 2017 Strategic Investment Conference

Don’t miss out as some of the world’s leading asset managers, geopolitical experts, and Federal Reserve insiders, including John Mauldin, George Friedman, and Ian Bremmer, discuss how to assemble a winning portfolio for the Paradigm Shifts now destabilizing the world. Click here to tune in.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in