Markets Take the Lead When It Comes to Factoring in Recession
- Investors debate implications of recent moves of asset prices
- Rebound in high-yield debt, U.S. stocks muddies deliberations
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Many financial markets are already signaling that the U.S. is more likely than not hurtling toward recession. But will they prove prescient or overly fretful?
The prospect of a widespread yield inversion in the Treasury market, which has preceded U.S. downturns for more than half a century, has generated the most alarm and is edging even closer to fruition. When falling yields are combined with the declines since the third quarter in stocks and commodities, as well as investment-grade and junk-rated corporate debt, it suggests about a 50 percent probability of an economic contraction within a year, according to JPMorgan Chase & Co.