Sure about the recession?
We are seeing some high frequency data slow recently. Inverted curves lead to recession, but with real yields lagging, things can take time to develop. Below are a few excerpts from TS Lombard's Steven Blitz worth considering before you go all in on the recession narrative:
"In the end, it will take a sharp, sustained reversal in consumer spending to turn GDP growth negative. I expect weak spending in Q2, 1.5% Q/Q real GDP growth following 1.5% in Q1, followed by a pickup in the second half....
Fact is, no recession has begun with negative real rates. Firms can still borrow through inflation even after tacking on their credit spread. At the short end, inventory financing (commercial paper rates) remains well below inflation. The economy slows when the cost of short-term financing exceeds inflation – and rates are very far from that right now."
"In the end, it will take a sharp, sustained reversal in consumer spending to turn GDP growth negative. I expect weak spending in Q2, 1.5% Q/Q real GDP growth following 1.5% in Q1, followed by a pickup in the second half....
Fact is, no recession has begun with negative real rates. Firms can still borrow through inflation even after tacking on their credit spread. At the short end, inventory financing (commercial paper rates) remains well below inflation. The economy slows when the cost of short-term financing exceeds inflation – and rates are very far from that right now."
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