US Recession Watch Talking Points:
- A key spread in the US Treasury yield curve – the 3m10s – is now suggesting that there is nearly a 33% chance of a recession hitting the United States within the next 12-months.
- The US yield curve inversion comes as US growth concerns around the US-China trade war have provoked the Federal Reserve into a more dovish policy stance.
- US recession fears thanks to the US-China trade war now see a 90% chance of 50-bps of interest rate cuts by the end of the year, and a 51% chance of 75-bps of interest rate cuts.
The dog days of summer are here. Now that we’ve passed the Fourth of July holiday in the United States, markets begin the long slog to early-September US Labor Day holiday. The coming weeks will likely be marked by lower liquidity and lighter market participation – if this is a typical summer. But a quick check of the geopolitical landscape suggests summer 2019 will be anything but typical for traders.
Why should traders be expecting more volatility across markets in sumer 2019, more than in years past? We’d be hard-pressed to forget about Brexit, the changing European Central Bank leadership, North Korean denuclearization efforts, and accelerating Iranian nuclear proliferation. Yet none of these compare to the impact that the US-China trade war is having