• Macro Strategy

    The Inverted Yield Curve: Harbinger of Recession?

    May 2019

    An inversion of the U.S. yield curve historically precedes a U.S. recession with an average lead time of about 14 months. According to our yield curve-based model, there is a 34% probability of a recession in the next 12 months. The Index of Leading Economic Indicators indicates that the U.S. economy is slowing, not contracting. The latter, not the former, is what historically tends to precede a recession. The spread between year-over-year nominal GDP growth and the federal funds rate suggests that current policy is still accommodative in our view. Solid corporate profit growth and a record low unemployment rate underpin a positive fundamental view. 

  • Macro Strategy

    Last Time Was Different: Why Recession Fears are Overdone

    April 2019

    We believe the next recession is likely to be anti-climactic, particularly for anyone whose only experience is the 2008 financial crisis. We feel a normal, or possibly even shallow recession is more likely. However, the current weak position of monetary policy means that speed of recovery may be of greater concern than depth of a future recession.

  • Macro Strategy

    Not Dead Yet: Productivity is Looking Mid-Cycle

    March 2019

    U.S. labor productivity growth has been increasing over the last several quarters. This is strange late cycle behavior; improvements in productivity historically tend to happen during the recovery phase of a business cycle. We see this as a sign that the business cycle could have some life left to it, and a recession may not begin until after 2020.