According to BofA (Bank of America), the risk of recession is growing. Based on the latest information, the bank’s international economist presently foresees a higher than 30% odds of a recession in the upcoming year. In a note to clients, Michelle Meyer—Head of US Economics at BofA—said, “The official model by bank has shown the probability of a slump in the next 12 Months was only pinned at around 20%, but our subjective call was based on the data and incidents that led us to believe that it is near to a 1-in-3 chance.” The instability around the U.S.-China trade battle and an economic slowdown globally resulted in interest rates to stumble and affected the major stock averages in the last few weeks.
The past month’s jobs report illustrated a robust consumer, but business speculation was low as business owners and investors juggled new tariffs and financial policy uncertainty. Meyer said that along with this “policy ping pong some economic pointers are indicating a coming recession.” For one, the gains on the 10-Year Treasury yield declined under the yield on the 3-Month, which is an inverting part of the yield curve. Meyer further stated that three of five economic pointers that monitor business cycles—such as industrial production, auto sales, and aggregate hours worked—were at levels reached before the previous slumps.
On a related note, a lot of signs are directing toward the U.S. financial system slipping into a slump in the next year as the Treasury yields are tilting downward, freight shipments are reducing, and company officials are collectively becoming nervous. Tech titans having strong balance sheets have seen their stock costs surging since the previous recession ended in July 2009. Amazon was up over 2,000%, Apple was up almost 900%, and Microsoft was up over by 400%.