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Is The U.S. Economy Headed For A Recession?

The Treasury Note Could Be The Canary In The Economic Mine

December 04, 2018 - 2:26 pm


A lack of clarity around a U.S.-China trade truce, announced over the weekend by the Trump administration, is contributing to a sharp fall in the stock market.

    The Dow Jones industrial average plummeted 586 points in early afternoon trading, a drop of 2.3 percent. Other market indexes also fell sharply.

    Also contributing to the decline are increased fears about future U.S. economic growth. The yield on the 5-year Treasury note has fallen below the yield on the 2-year note, a move that suggests investors are fearful about the economy's longer-term health. In the past, when longer-term yields have fallen below shorter ones, that has signaled a potential recession could follow within a year or so.

    Regarding the China trade deal, White House officials have struggled to explain, for example, whether China has actually agreed to drop its 40% tariffs on U.S. autos. And Treasury Secretary Steven Mnuchin said Tuesday on the Fox Business Network that China agreed to buy $1.2 trillion of U.S. products, but added, "if that's real" it would close the trade deficit with China and said "we have to have a negotiated agreement and have this on paper."


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