Crypto investors beware: 40-year Fed indicator predicts recession ahead 😱

Understanding Potential Recession in the US Economy

Speculation about a potential recession in the United States economy has been escalating, with several indicators pointing to uncertainty.

Critical Analysis of Recession Probability

Analysis by The Kobeissi Letter suggested a significant probability of a recession within the next 12 months.
Based on the Federal Reserve model, there is a 52% chance of an economic downturn over the next year.
While the probability has decreased from its peak, caution signals remain for the US economy.

Historical Trends and Indicator Reliability

The model has historically shown that a recession follows when the probability exceeds 30% within two years.
Each significant spike in recession probability has been followed by an actual recession.

Yield Curve as an Economic Signal

The yield curve, a crucial economic indicator, has been inverted for over 700 days, which is the longest duration in history. An inverted yield curve usually precedes a recession where short-term interest rates exceed long-term rates.

Impact of Extended Inversion

The extended inversion complicates the possibility of a “soft landing,” where the economy slows down without entering a recession.
The likelihood of avoiding a recession appears slim given the historical context and current economic indicators.

“Over the last 40 years, each time the recession probability exceeded 30%, the US economy experienced a downturn within 2 years. The yield curve’s prolonged inversion poses challenges for achieving a soft landing,” noted The Kobeissi Letter.

Emerging Indicators of Recession

A troubling trend in the labor market shows permanent job losses are accelerating aggressively, as reported by Finbold.
Significant spikes in permanent job losses have consistently preceded recessions since 1995.

Hot Take: Stay Informed and Prepared

As a crypto investor, it’s crucial to stay informed and prepared for potential economic downturns. By understanding the indicators of a looming recession, you can make strategic decisions to protect your investments and navigate through uncertain times.