What a Yield-Curve Inversion Really Says About the U.S. Economy

The chance of a recession in 2020 has Democratic campaign strategists feverish with anticipation—while trying not to show it—and President Trump even more amped up than usual. While Trump says he’s confident of the strength of the U.S. economy, his actions indicate otherwise. He’s demanding that the Federal Reserve cut its key rate target by at least a full percentage point, which would be extraneous at best and outright inflationary at worst if the economy really is running strong. He recently delayed some tariffs from September until just before Christmas to leave more money in consumers’ pockets. He’s also mulled tax cuts, although he told reporters on Aug. 21 that they’re off the table for now. Surely Trump is mindful that the reelection bids of both Jimmy Carter and George H.W. Bush were derailed by recessions.

Well, guess what, folks? It’s still rainbows and pots of gold out there. Contrary to what seems to have become the overnight conventional wisdom in politics, a recession before Election Day 2020 remains a less than 50-50 proposition. In a Bloomberg survey of economists, the median estimate of the probability of a U.S. recession within the next year is 35%. Back in February, 52% of economists surveyed by the National Association for Business Economics expected a recession by the end of 2020. In the latest edition, released on Aug. 19, that figure was down to 40%.