Recession Risks Are Piling Up – Investors Need to Get Ready
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.
“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.
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Header featured image (edited) credit: Market graph/FB Screen shot
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All systems that we used to play and create the illusion of societies, must fall. I have known that for about 10 years but did not know how. I would have never guessed that all the systems would be destroyed all at once. The situations that are showing themselves now in the light of truth are so corrupt they must all fall. Can’t you name one system that is truth and not corrupt? Can’t rebuild on a rotten foundations and doing the same thing over and over is called insanity. They must be torn down and destroyed and then rebuilt in love and light. (Systems: Medical, All levels of Governments, Legal, Monetary, Religious, Food, War for Peace, etc. This is not to say everyone in these systems are corrupt.)