BAML warns 1-in-3 chance of US recession in 2019/20
(13 August 2019 - United States) Bank of America Merrill Lynch's (BAML) global economists foresee a greater than 30 percent chance of a US recession in the coming year based on the most recent official data.
Uncertainty around the U.S.-China trade war and a global economic slowdown have caused interest rates to fall and weighed on the major stock indices in recent weeks. Business investment is low as investors and business owners juggle new tariffs and fiscal policy uncertainty.
The yield on the 10-year Treasury yield dipped below the yield on the 3-month, inverting part of the yield curve. This inversion, although a recession indicator, is not as concerning as an inversion of the 2-year yield and the 10-year yield which has yet to occur. Three of five economic indicators that track business cycles including auto sales, industrial production and aggregate hours worked are at levels last touched before previous recessions. The “bright spot” of the economy is that initial jobless claims remain low.
“Our official model has the probability of a recession over the next 12 months only pegged at about 20 percent, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance” BAML's head of US economics Michelle Meyer quoted.