• Recent yield curve steepening has actually reduced the odds of a recession to 12% (Chart 1). This Fed model could well reflect a longer-term view that we will see a sharp recovery later this year. Remember, the curve inverted last year many quarters before today’s recession.
• This idea of a V-shaped recovery is confirmed by the consensus of economists. They assign a 40% chance of a recession and their base case is for zero growth in Q2 before we see recovery in H2 (Chart 2).
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