Category Archives: financial markets

One Year In: What Did Putin’s Gambit Do to Spreads, Uncertainty, and Activity?

Bluntly put, term spreads moved toward inversion, and inflation expectations adjusted for premia increased. VIX has been elevated since February 2022, and GeoPolitical Risk rose in the period right after the invasion. Growth, which had been accelerating according to weekly indicators, then decelerated. In other words, “Thanks, Putin”.

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Recession Probabilities Incorporating Foreign Term Spreads

Foreign term spreads in several major financial centers have inverted (you can see the yield curves here). What is the probability of a recession 12 months ahead, using the 10yr-3mo term spread, the foreign (Germany, UK, Japan, Canada) 10yr-3mo term spread, and the national Financial Conditions Index (FCI), as suggested by Ahmed and Chinn (2022)? Answer: High

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