Since November 2022, the US economy has been flashing warning signs, as the yield curve has been inverted for over 18 months. This occurs when the yield on the 2-year US Treasury exceeds that of the 10-year Treasury. While some economists have toned down their recession warnings, Paul Dietrich, B. Riley Wealth’s chief investment strategist, predicts a return to recession calls within the next six months.
Historically, recessions can take up to 28 months to officially begin after being signaled by the yield curve and leading indicators. Despite some resilience displayed by the US economy, Dietrich still believes a downturn is on the horizon. He cautions against those claiming a new bull market is starting and that a recession can be avoided this time.
Dietrich maintains a bearish outlook, previously predicting a possible mild recession this year with potential stock declines of up to 49%. Stocks appear to be overdue for a correction, as the US is currently in its longest-ever secular bull market spanning 15 years. Therefore, investors should remain skeptical of optimistic forecasts and prepare for a potential economic downturn in the near future.
In conclusion, while there are signs of strength in the US economy, Dietrich warns that a recession is imminent based on historical indicators. He advises investors to remain cautious and prepared for an economic downturn in the near future.
