Many indicators are pointing to a recession

By Dude Dangerous | Is it legitimate? | 13 Mar 2022


The yield curve

At the point of closing on Friday, the US treasury bond yield curve is slightly inverted between the 7 and 10, besides the slight inversion the yield curve is generally extremely flat pointing at a high probability for a weak economy in the future if not a recession. The yield curve flattening started already last year but became recently only flatter. The yield curve inversion is known to be a very accurate predictor of recessions. https://www.ustreasuryyieldcurve.com/

The eurodollar futures curve

The eurodollar futures curve, which is a bet on the 3 months libor, started inverting already early last December and is currently inverted from the Dec. 2023 contract. The inversion is only becoming deeper is the later contracts and suggests that there is a high probability that the economic situation in the near future will be such, that the FED will be forced to stop hiking rates, or even has to lower the rates again. The eurodollar futures curve is also an accurate indicator for recessions and predicted the reaction of the Fed for the GFC as well as March 2020 https://www.cmegroup.com/markets/interest-rates/stirs/eurodollar.quotes.html

The rising dollar

Since the lows about one year ago, the US dollar is rising rapidly on the DXY. It is already very close to multi year highs and if it keeps it's momentum we could see levels not seen since 20 years. A rising dollar suggests an illiquid dollar shortage situation which isn't any good for the economy. https://www.marketwatch.com/investing/index/dxy/charts

The rising oil price

I think this one doesn't need much explanation, but if the oil price it too high it will damage the economy because it will squeeze out the budget of the people causing to less economic activity for anything else. A quickly rising oil price is associated with recessions and this time the oil price is definitely rising very quickly. https://oilprice.com/oil-price-charts/

High CPI prints

Similar to high oil prices, if the CPI rises quickly without similarly high rising wages across all income classes, the people will be squeezed out in their spending for other stuff and services, which is bad for the economy. https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm

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Dude Dangerous
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