Recession Update
In my blog post The Three Horsemen of the Grapepocalypse, Part 2: The Coming Recession, I included a probability distribution of when I think the next recession is coming:
■There is a 95% chance that we'll see a recession within the next 3 years;
■25% chance in 2019;
■40% chance in 2020;
■30% chance in 2021;
■5% chance in 2022 or later.
■My probability distribution could be shattered by sudden shifts from a wide range of disruptions from either natural or policy disasters.
I am updating that estimate. At the time, the spread between the 3-month Treasury yield and the 10-year Treasury yield was 87 basis points (2.35% vs. 3.22%). In just those 19 weeks, the curve has flattened and the spread is only 16 basis points (2.44% vs. 2.60%).
For that reason, I am updating my recession timing probability distribution to be more pessimistic:
■There is a 95% chance that we'll see a recession within the next 3 years;
■45% chance in 2019;
■35% chance in 2020;
■15% chance in 2021;
■5% chance in 2022 or later.
■My probability distribution could be shattered by sudden shifts from a wide range of disruptions from either natural or policy disasters.