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Recession Indicators and Macro Highlights

by Alan Daniel

Recession Indicator: US-China Trade War

The first recession indicator may be that of the ongoing US-China trade war continues to wage on.

Both parties have compelling reasons to stand their ground as both want to preserve and protect economic prosperity.

The United States escalated trade war tensions under the Trump administration.

This is an essential macroeconomic event because of the deep inter-dependency between the two countries and the increasing nature of globalization.

Many U.S. entities from mid-size e-commerce firms to vast Fortune 500 corporations conduct business with China. Industries such as Hollywood movies, Boeing and aviation, Apple and technology, Starbucks Coffee, Tesla and automobiles, Walmart and retail, among other vital sectors, according to the South China Morning Post.

This profound relationship between China, the United States, and further globalization makes a trade war very costly. A trade war may not turn out well for companies from both sides of the ocean. Trade wars may not always be a recession indicator but can help to accelerate a recession if global profits are already in a state of decline. An increase in economic tensions would not help to make either country great again.

Recession Indicator: A Slowdown in Germany, in London and Declines For Italy and Argentina

Markets are in a state of uncertainty about the fate of the German economy. It seems as if the country may be headed for a recession. If Germany is headed for a recession, this may be a bad sign for the European continent as a whole. Germany’s economy didn’t just slowdown in growth. It shrunk slightly as of last quarter. Recession concerns coupled with political turmoil in Hong Kong, Argentina, Venezuela, and Italy are a cause for concern among traders and investors.

Recession Indicator: Inverted Yield Curves

Inverted Yield Curves continue to appear on and off again since the latter half of 2018. These signals indicate that investors optimize for the present and are fearful of the future. Germany 10 year yields recently dropped to a drastic low of -0.62%, 2yr (2s10s) treasuries in the U.S. inverted again. The last time this happened was in 2007. U.K. yields have also inverted. Brexit is another impending factor for Great Britain that causes constant consternation for traders and investors.

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