ZacG on Nostr: As we enter the latter half of 2023, debates surrounding the possibility of a ...

As we enter the latter half of 2023, debates surrounding the possibility of a recession are only increasing.

In my latest article, I break down 7 key economic indicators hinting towards a slowing economy 🧵👇

1️⃣ Yield Curve Inversions have been a very reliable indicator of a slowing economy. In fact, since 1969 a yield curve inversion has preceded every US recession. In June of 2022 the 10yr and 2yr Treasury yields inverted begging the question—where is the recession?

2️⃣ Large Bank Failures since the Great Financial Crisis in the fall of 2008 echoes historical precedence and highlights vulnerability in the financial structure. It was 6 months after the failure of Bear Sterns in March of 2008 before the recession arrived in full force—could history repeat itself?

3️⃣ One of the Fastest Interest Rate Hike in US History has pushed the federal funds rate to decade highs and imposed higher borrowing costs of individuals and businesses alike. The economy may face potential headwinds in adjusting to tighter credit conditions.

4️⃣ The tendency for the Unemployment Rate to bottom before a recession raises questions about our currently low unemployment rate. While it may seem positive on the surface it could mask underlying weakness in the economy that manifests as the recession unfolds.

5️⃣ A Declining Purchasing Managers Index (PMI) suggests a contraction in the manufacturing and services industry and has served as an early warning sign of impending recessions many times. This worrying trend may further contribute to a slowing economy.

6️⃣ Tightening Credit Conditions from aggressive interest rate hikes are reaching levels not seen since the Great Financial Crisis in 2008 and a fall in commercial loans has been evident. While tightnening credit itself does not predict a recession, it's correlation with economic downturns should not be ignored.

7️⃣ The Fed Predicting a Mild Recession adds further credibility to the possibility of a recession on the horizon. As the central banks responsible for guiding policy their awareness of the risks speaks heavily to the possibility of a slowing economy.

Together these indicators paint a clear picture of economic challenges ahead. While the exact timing and severity of a recession is difficult to predict, it is crucial to remain aware of the risks we face.

Check out my full article for an in-depth analysis of these economic indicators and what it means for the economy.

https://open.substack.com/pub/zacguignard/p/2023-macro-outlook-7-signs-of-a-looming?utm_source=share&utm_medium=android&r=26emfn