DB on their US recession call (this in summary), citing, amongst other indications:
- the aggressive rate hikes, curve inversions
to
- lead to a US recession with the appropriate lag and not a soft landing
- just about every leading indicator is now pointing to a US recession by the end of the year
More:
- A key pointer was the 2s10s inversion back in March 2022. For us that was the final signal that the long countdown clock to the recession had begun.
- given how long the 2s10s has been inverted now, this has to have already impacted future activity. The yield curve predicts lending standards and animal spirits. The longer short-term rates are high relative to the rest of the curve the more money flows into safe assets at the short-end rather than economy-growing risky assets/lending/investments further out the curve.
