Wed Jul 3, 2019
Author: RV News
Signs show another U.S. recession in looming, according to an economic indicator that has preceded every recession during the half century, National Public Radio reports.
Economists and Wall Street traders call it a "yield curve inversion." It refers to a time when long-term interest rates are paying out less than short-term rates.
That curve has been flattening or declining for more than a year. That is raising concern among some analysts that investors' long-term view of the market is not positive and that an economic downturn is coming.
But on Sunday, an unpromising milestone was reached. The yield curve remained inverted for an entire, three-month quarter, which has for five decades been a clear signal that the economy is heading into a recession in the next nine to 18 months, Campbell Harvey, a Duke University finance professor, told NPR. His research in the mid-1980s first linked recessions to yield curve inversions.
"That has been associated with predicting a recession for the last seven recessions," Harvey said. "From the 1960s, this indicator has been reliable in terms of foretelling a recession, and also importantly, it has not given any false signals yet."
Even so, other economic forecasters do not see a recession coming.
Randal Quarles, the Federal Reserve's vice chairman for banking supervision, has said that the gap between short- and long-term interest rates does signal a looming economic downturn.
To read the full report, click here.