The bank released a surveyed-based report stating that investment fund managers were curving their expectations of global growth, as well as profit estimates, which dropped to their lowest since March 2020 —and closer to those during the dot-com boom in 2001 and the crash in 2008.
The first week of April saw the first global bank predicting a recession, the Deutsche Bank, which foresees that the Fed’s measures will send the economy into a “mild” slump by the end of 2023.
The Yield Curve
The U.S. yield curve has inverted in the last week, which means that short-term debt is more profitable than long-term debt. According to economic theory, in a normal situation, long-term lending should be more profitable than short-term lending, since the longer the time, the greater the uncertainty of what might happen.
The anomaly occurs when investors do not trust the future of the economy in the short term and demand a higher remuneration from the issuer of public debt.
A study by the Reserve Bank of San Francisco shows that in the last 60 years, the inversion of the yield curve has occurred 10 times. In the past, this phenomenon was preceded by about a year every slowdown in the US —except for 1966.
What History Says
Although rate cuts are often associated with an economic slowdown, this is not always the case.
