When Will The Fed Tighten Enough To Cause The Next Recession?

In addition to the wildly popular topic of the market’s record low volatility, coupled with speculation what could break the current spell of “endemic complacency” and what its impact would be on asset prices (yesterday we posted a fascinating take by DB’s Aleksandar Kocic on the issue of the markets current “metastability”), another question that has fascinated the economic community is when will the next recession hit.
As we discussed last weekend, according to one of the more popular contextual indicators, commercial bank C&I loan creation, the US economy is poised for a contraction as soon as months, if not weeks from now, as C&I loan growth has tumbled from 7% at the start of the year to just 1.6%, the lowest since 2011, and at the current rate is poised to go negative in the very near future.
Loan creation, however, is just one of several “pre-recessionary” early indicators. Another one comes straight from the market, and specifically the Treasury yield curve which traditionally has always flattened sharply, and in some cases turned negative, going into a US recession.

This post was published at Zero Hedge on Jun 18, 2017.

 

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