Strategists at Citigroup Inc., using a mix of spot and forward curves to help construct a predictive model, now say that there’s a greater than 50% chance of a recession over the next year.
“It’s a perfect storm now with both sides of the curve causing the inversion, and making it likely to continue,” said Jason Williams, a strategist at the New York-based bank. “Given the strength of the labor market and still high inflation, there’s no reason for the Fed to slow down it’s hiking.”
Investors have been conditioned to expect the “Fed put” because they have underwritten the stock market following every significant decline since the 1987 crash. The challenge today is inflation is way above the Fed Funds rate and also outstripping wage growth. Providing the normal liquidity surge into that environment is counterproductive to ensuring stable prices.Click HERE to subscribe to Fuller Treacy Money Back to top