US: Recession talk is on the rise – Westpac
|According to Richard Franulovich, head of FX strategy at Westpac, the inversion of the 3m-10yr US yield curve late last week has understandably put US recession risk back in the spotlight given its enviable track record as a predictor of US recessions.
Key Quotes
“The yield curve based model accurately predicted all five US recessions that occurred in-sample between 1970-1996 (i.e. the estimated probability of a recession exceeded 50%) and accurately predicted the two recessions that occurred out of sample in 2001 and 2008-2009 too.”
“This same model currently estimates the probability of a US recession at a relatively high 20% over the next twelve months. But, if the curve remains inverted for another two months the probability rises to just over 40%; a very elevated reading.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.