Bond Market Suggests US Economy is Not Headed for Recession in 2023 or 2024
By The fear of a looming recession has been on everyone's mind lately, as economies are still trying to recover from the impacts of the COVID-19 pandemic.[0] However, data from the bond market suggests that the US economy is not going to enter a recession anytime soon. According to DataTrek Research, the spread between corporate bonds and US Treasuries is steadily narrowing, which means that investors are not expecting any sudden decline in corporate earnings. This suggests that the economy is not on the verge of entering a recession in 2023 or 2024.
The bond market is one of the most important indicators for forecasting future economic trends. Corporate bond yield spreads measure the risk appetite of bond investors, and when markets become more comfortable with the stability of earnings, these spreads tend to decline.[1] Over the past few months, the bond-yield spreads have been declining to levels that are below the average seen from 2015 to 2019, which was a period of relative calmness in the broader economy.
It appears that the current bond-yield spreads suggest that a 2023 recession can be avoided.[2] This is a welcome development, as a recession could have a significant impact on individuals and businesses alike. However, while the bond market appears to be signaling that the economy is not going to enter a recession anytime soon, it is important to remain vigilant and to keep monitoring the economic indicators closely.
0. “Nine ways to recession-proof your personal brand” Jamaica Observer, 8 Feb. 2023, https://www.jamaicaobserver.com/business/nine-ways-to-recession-proof-your-personal-brand/
1. “Here's why the US economy won't fall into a recession this year or next, according to a key market signal” Yahoo Canada Finance, 7 Feb. 2023, https://ca.finance.yahoo.com/news/heres-why-us-economy-wont-114704173.html
2. “What recession? Inflation, GDP offer hope for ‘soft landing’” The Hill, 28 Jan. 2023, https://thehill.com/finance/3833694-what-recession-inflation-gdp-offer-hope-for-soft-landing/
