China will release its trade balance for July on Tuesday, and inflation data on Wednesday
Yield curve still points to strong recession chance, NY Fed indicator shows
Though the economic data of late suggests otherwise, market pricing still indicates the U.S. is heading for recession, according to a New York Federal Reserve gauge. The central bank compares the difference in yields between 3-month Treasurys and the 10-year note. When that curve inverts, it has been a tell-late recession sign, according to data going back to 1969.
An update Friday morning taking the yield spread at the end of July puts the recession probability in the next 12 months at 66%. The inversion at the end of the month was near 1.5 percentage points. While the recession probability is down from the peak of 70.8% in May, it still is a strong market indicator that a contraction is coming.Equity markets have been boosted by a better-than-expected earnings season and hopes for a soft landing, says Bank of America. The firm added that Chinese equities notably outperformed."Despite the declines in inflation and troughing of leading indicators, the regime model maintains its medium-term horizon bearish tone – preferring bonds to equities.
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