The State of Markets: "Treasury Yields & US Recession Risk”
US recession concerns continued to grow this week, fuelled by disappointing retail sales data on Monday and more signs of softness in cyclical parts of the economy (e.g. softer than expected Empire Manufacturing and NAHB readings). Added to which, the Fed downgraded its growth forecast on Wednesday. As such, and with Powell’s commentary perceived as dovish, the US 10 year yield has moved lower and is, once again, testing its 200 day moving average (see key chart below).
The key question, therefore, is: Are recession concerns warranted? How high is recession risk? And, how much lower will yields fall? Are they finding support at the 200 day? Or about to break lower? We have outlined our views on those questions in recent research, available below for subscribers (or click HERE for a trial).
Next week’s US macro data has a strong housing theme, with updates on new home sales, building permits, and FHFA house prices (all on Tuesday), followed by pending home sales on Thursday. Elsewhere, S&P manufacturing & service sector PMIs (March first estimates) are on Monday, durable goods orders will be released on Wednesday, followed by personal income and spending (including PCE inflation) on Friday. In the UK, Chancellor Reeves will present the Spring Statement on Wednesday and, in Europe, it’s ‘inflation week’ (with first estimates for March CPI due on Friday for several key economies). Please see below for a full list of key data and events this coming week.
Key chart: US 10 year Treasury yield (%) with 50, 90, & 200 day moving averages
Upcoming important data/events this week:
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Events: |
Chancellor Reeves presents the Spring Statement (Wed, 12pm). |
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Monday: |
Manufacturing & service sector PMIs (March first estimates) for France (8:15am), Germany (8:30am), Eurozone (9am), UK (9:30am), & the US (1:45pm). |
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Tuesday: |
US new home sales (Feb, 2pm); US Conference Board consumer confidence (Mar, 2pm). |
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Wednesday: |
UK headline & core CPI, RPI & PPI (Feb, 7am). |
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Thursday: |
US GDP (Q4 third estimate, 12:30pm); US pending home sales (Feb, 2pm). |
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Friday: |
US personal income & spending including headline & core PCE (Feb, 12:30pm); German unemployment (Mar, 8:55am). |
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Key earnings: |
N/A |
Key Research
US Quarterly Asset Allocation Update No. 61, 19th March 2025:
“US: Mid-Cycle Slowdown NOT Recession”
“…I think we’ve got real, cascading uncertainty that makes me very nervous about the real economy and the markets. We’ve got a real possibility of a vicious cycle, where weakening economy leads to weaker markets, and then weaker markets lead to a weakening economy…”
Source: Larry Summers, CNN interview: https://edition.cnn.com/2025/03/11/politics/trump-stock-market-recession-fears/index.html
Market optimism about the US economy has shifted dramatically in the past two months since inauguration day. When Trump and his team were elected in November, confidence moved sharply higher (e.g. NFIB small business optimism), reflecting the view that ‘animal spirits’ would be re-ignited as deregulation (i.e. ‘taking the shackles’ off the economy) and freeing up of bank capital would drive strong economic growth (along with fiscal stimulus & tax cuts). With that, US bond yields backed up (initially into mid-November and then again into mid-January, peaking at 4.79% on 13th January).
Key North American macro data & events:
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Events: |
Speeches by the Fed’s Musalem on monetary policy (Wed, 5:10pm), Barkin in Washington (Thurs, 8:30pm) & Bostic on housing finance (Fri, 7:30pm). |
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Monday: |
US Chicago Fed national activity (Feb, 12:30pm); US S&P manufacturing & service sector PMI (March first estimate, 1:45pm). |
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Tuesday: |
US Philadelphia Fed service sector activity (Mar, 12:30pm); US FHFA house price index (Jan, 1pm); US building permits (February final estimate, 12pm); US new home sales (Feb, 2pm); US Richmond Fed manufacturing index (Mar, 2pm); US Conference Board consumer confidence (Mar, 2pm). |
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Wednesday: |
US durable goods orders (February first estimate, 12:30pm). |
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Thursday: |
Canadian employment change (Jan, 12:30pm); US GDP (Q4 third estimate, 12:30pm); US weekly jobless claims (12:30pm); US pending home sales (Feb, 2pm); US Kansas City Fed manufacturing sector activity (Mar, 3pm). |
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Friday: |
Canadian GDP (Jan, 12:30pm); US personal income & spending including headline & core PCE (Feb, 12:30pm); US Michigan Sentiment (March final estimate, 2pm); US Kansas City Fed service sector activity (Feb, 3pm). |
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Key earnings: |
Cintas, Paychex (Wed). |
Fig B: US Conference Board consumer confidence (index)
Key European macro data & events
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Events: |
Speeches by the ECB’s Holzmann in Vienna (Mon, 9am), Vujcic in Warsaw (Tues, 10:50am), Cipollone at crypto assets conference (Wed, 6pm), Guindos, Villeroy, Wunsch & Escriva in Brussels (Thurs, 1-4:45pm) & Schnabel in London (Thurs, 6:30pm); Riksbank release minutes from monetary policy meeting (Wed, 8:30am). |
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Monday: |
Spanish mortgage approvals (Jan, 8am); HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all March first estimates. |
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Tuesday: |
Eurozone new car sales (Feb, 5am); Spanish PPI (Feb, 8am); German IFO business climate (Mar, 9am). |
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Wednesday: |
French INSEE consumer confidence (Mar, 7:45am); Spanish GDP (Q4 final estimate, 8am). |
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Thursday: |
Spanish retail sales (Feb, 8am); Eurozone M3 money supply (Feb, 9am). |
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Friday: |
German GfK consumer confidence (Apr, 7am); French consumer spending (Feb, 7:45am); French headline CPI & PPI (March first estimate, 7:45am); Spanish headline & core CPI (March first estimate, 8am); German unemployment (Mar, 8:55am); ECB 1 & 3 year CPI expectations (Feb, 9am); Italian ISTAT consumer & manufacturing confidence (Mar, 9am); Eurozone consumer confidence (March final estimate, 10am); Italian PPI (Feb, 11am). |
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Key earnings: |
N/A |
Fig C: Eurozone M3 money supply (Y-o-Y %)
Key UK macro data & events
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Events: |
Chancellor Reeves presents the Spring Statement (Wed, 12pm); speech by the Bank of England’s Bailey on ‘growth in the UK economy’ (Mon, 6pm). |
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Monday: |
S&P manufacturing & service sector PMIs (March first estimates, 9:30am). |
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Tuesday: |
CBI distributive trade survey (Mar, 11am). |
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Wednesday: |
Headline & core CPI, RPI & PPI (Feb, 7am); Land Registry house price index (Jan, 9:30am). |
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Thursday: |
N/A |
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Friday: |
Retail sales (Feb, 7am); GDP (Q4 final estimate, 7am), monthly GDP estimate, industrial & manufacturing production, goods trade balance & construction output (Jan, 7am). |
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Key earnings: |
N/A |
Fig D: UK headline & core CPI (Y-o-Y %)
Key Asia-Pacific macro data & events
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Events: |
BOJ releases minutes of January meeting (Mon, 11:50pm); speech by the RBA’s Jones in a fireside chat (Mon, 11:10pm). |
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Monday: |
Japanese Jibun Bank manufacturing & services sector PMI (March first estimate, 12:30am). |
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Tuesday: |
Japanese PPI services (Feb, 11:50pm). |
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Wednesday: |
Australian CPI (Feb, 12:30am); Japanese ESRI leading index (January final estimate, 5am). |
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Thursday: |
Chinese industrial profits (Feb, 1:30am); Japanese headline & core CPI (Mar, 11:30pm). |
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Friday: |
N/A |
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Key earnings: |
Bank of China, China Life Insurance (Wed); ICBC (Thurs); Agricultural Bank China, China Construction Bank (Sat). |
Fig E: Japanese headline & core CPI (Y-o-Y %)
Last week:
Longview on Friday, 21st March 2025:
“Trump -> Is It Just Chaos? Or Is There A Plan?”
China Quarterly Asset Allocation Update No. 61, 20th March 2025:
“China: ‘Sugar Rush’ Economics”
US Quarterly Asset Allocation Update No. 61, 19th March 2025:
“US: Mid-Cycle Slowdown NOT Recession”
Commodity Fundamentals Report No. 186, 18th March 2025:
“OIL: BUY Case Brewing”
Prior week:
Longview on Friday, 14th March 2025:
“Equity Pullback – What’s Next?”
Quarterly Asset Allocation Update No. 61, 13th March 2025:
“Europe: Coming Back To Life”
Global Macro Report, 10th March 2025:
“Japan: Is It Normalising? a.k.a. Five Key Problems”