A Tour of the Future
A Tour of the Future by Brian Maher for Daily Reckoning
Sharp, bracing winds have scattered the fog. The horizon is now visible… and the future drifts into focus.
Yes, we have the future in sight.
Today we report the way ahead.
We begin where we stand — upon creaking and groaning floorboards…
Recessionary Warnings in all Directions
Manufacturing surveys indicate global manufacturing contracted in May… for an unprecedented 13th-consecutive month.
The Manufacturing PMI (Purchasing Managers’ Index) surveys indicate manufacturing crawls at its slowest rate since September 2009.
United States factory orders expanded merely 1.0% in May — the lowest rate since President Trump took the throne.
The Cass Freight Index — a broad measure of domestic shipping activity and a plausible thermometer of economic health — has dropped 3.2% since last April.
Meantime, the bond market flashes warnings of a lean season ahead.
Ten-year Treasury yields have dropped to their lowest levels in two years, to 2.12%.
And the yield curve has inverted. An inverted yield curve nearly always precedes recession.
Thus we stand upon our precarious perch, wary of the shifting, sandy foundations beneath us.
But it is the future we have in mind today…
Morgan Stanley: 60% Chance of Recession Within One Year
The professional optimists of the Federal Reserve’s Atlanta branch office expect Q2 GDP to ring in at a slender 1.3%.
J.P. Morgan has lowered its own sights from 2.25% to 1%.
It also projects 10-year Treasury yields will sink to 1.75% by year’s end… and 1.65% by next March.
JP Morgan also — incidentally — places the odds of recession in the second half of this year at 40%.
It placed those same odds at 25% one month prior.
Morgan Stanley has also revised its Q2 GDP forecast from 1.0%… to a pale and sickly 0.6%.
It further gives a 60% likelihood of recession within the next year — its highest percentage since the financial crisis.
Of course, the Federal Reserve looms large in our vision…
Rate Cuts A2re Coming
The current rate hike cycle is ended. The Federal Reserve will next slash interest rates.
Its Federal Open Market Committee gathers in two weeks’ time.