The Bond Market Is Sounding an Alarm That May Signal a Stock Market Crash -- but It Comes With a Silver Lining for Investors
Experts have waffled on whether the U.S. economy is headed for trouble. In October 2022, economists put the probability of a recession within 12 months at 63%, according to The Wall Street Journal. Inflation exceeded 8% at the time, and the Federal Reserve was raising interest rates at the fastest pace in decades. But the situation has changed dramatically since then.
Inflation has cooled to the point where policymakers are expected to cut rates in September, and the economy has continued to expand. U.S. gross domestic product (GDP) increased at an annualized 2.8% in the second quarter, while experts forecast just 2% growth. Economists now put the probability of a recession within 12 months at 28%. But investors are not out of the woods.
Bloomberg recently published an opinion piece by Bill Dudley, the former president of the Federal Reserve Bank of New York. The headline speaks for itself: "I Changed My Mind. The Fed Needs to Cut Rates Now." Dudley believes the economy is already slipping toward a recession, and that delaying rate cuts until September unnecessarily increases the risk.
Source Fool.com
