This Fed Indicator Is Signaling the Highest Chance of a Recession in 40 Years

[Inside Wall Street with Nomi Prins]( This Fed Indicator Is Signaling the Highest Chance of a Recession in 40 Years By Clint Brewer, Analyst, Rogue Economics With the S&P 500 now up 23% from its October 2022 lows, you’ve probably seen headlines declaring a new bull market and a rosy outlook ahead. But if you really want to know where the economy is headed next, you need to watch the bond market. That’s because moves by the Federal Reserve show up directly in the bond market. So while the stock market is volatile and noisy, the bond market is where you can find reliable signals for the economy based directly on the Fed’s actions. And unfortunately, even as the investor mood turns jubilant, signals from the bond market are sending a very different message… Recommended Link [July 26: The End of the U.S. Dollar?]( [image]( There have been a few moments that changed the course of America forever: JFK’s assassination… 9/11… The Nixon shock of 1971. What’s scheduled to take place on July 26, at 2 pm ET, could be another one of those moments. And those who don't prepare could end up holding a bunch of worthless U.S. dollars. [Click here to see the details…]( -- How the Fed Manipulates Rates and the Economy As a reminder, the Fed manipulates the economy directly by raising or lowering interest rates. It does that by moving the rate that banks use to lend on overnight loans – or the Federal Funds rate. As a result, shorter maturities, like the 3-month Treasury bill, closely follow the Fed’s actions. The Fed has been jacking up the Fed Funds rate at the fastest pace since the 1980s. So the rate on 3-month bills is also skyrocketing. In fact, the 3-month bill is at the highest level in over 20 years. Right now, short-term rates are way higher than long-term rates. The difference between the two is called the yield curve. When short-term rates are above long-term rates, the yield curve is said to be inverted. And an inverted yield curve becomes a self-fulfilling prophecy for tanking the economy. That’s because banks pay a short-term rate on deposits. They also collect the interest from longer-term loans they give out, like your mortgage. And in a healthy economy, the short-term rate is less than the long-term rate. That helps banks stay profitable. But when shorter-term rates rise more than the long-term rate, that’s a sign that bank profits are being compressed. In other words, it means banks are paying more on deposits than what they are collecting on their loans. So giving out loans becomes less profitable. And it leads to banks pulling back on lending. A pullback in lending cascades through the rest of the economy. Our economy is built on access to credit. So when both consumers and businesses have less access to money… that means less spending on things like homes or factory expansions. The Fed tracks the odds of a recession caused by an inverted yield curve and a bad lending environment. And this indicator is currently flashing the worst signal in four decades. Recommended Link [The One Ticker Retirement Plan]( Over the Shoulder Demo Now Available [image]( Market Wizard Larry Benedict crushed the market in 2022. But he didn't do it with a “traditional” method… For a limited time, he’s sharing a free over-the-shoulder “demo” of his strategy in action. It takes less than 10 seconds… [Watch it here.]( -- The Highest Odds of a Recession Banks are holding on for dear life to keep their profits high. They’ve done that by refusing to pay a higher rate on deposits, which is leading customers to pull their money out. This created the liquidity crisis we first saw in March when three U.S. banks went belly up. Here’s how Inside Wall Street’s editor Nomi Prins put it recently: Silvergate Bank, Silicon Valley Bank, and First Republic Bank offered lower deposit rates than their peers and competition. So depositors had no real incentive to keep their money. It was a game of chicken and the regional banks blinked. As rates were rising, depositors turned elsewhere to get better interest returns on their deposits. But now, out of fear of being the next bank to go under, many banks are changing their minds. They’ve begun to pay higher rates on their deposits, which will lead to a crunch in bank profits. And as described above, a crunch in bank profits means a pullback in lending. That’s why the yield curve is so important. It shows if our economy is running smoothly. In fact, the yield curve is so important that the Federal Reserve built their own recession probability model based on it. And right now, it’s signaling the chance of a recession unfolding over the next year at 71%. Take a look below. [Chart] As you can see, the Fed is predicting the highest chance of a recession in 40 years. And that recession can happen as soon as May 2024… Recommended Link [“Amazon Secret Royalty Program” Issuing Payouts Starting September 10th…]( [image]( Thanks to an obscure IRS loophole (on page 1,794 of the U.S. tax code)… Regular Americans can now collect payouts from what Brad Thomas calls “Amazon’s secret royalty program.” (It’s a loophole so big, you could drive a monster truck through it…) [And in this video]( he shows you everything you need to know, including: - The history behind these “secret royalty programs” and exactly how they work… - How YOU can collect up to $28,544 per year… (Or more depending on the size of your stake…) - The easiest way to INCREASE your payouts – without investing any additional money! - And why billionaire Ray Dalio sold off his entire stake in Amazon… And increased his stake in the “Amazon’s secret royalty program” by over 500%... But you must hurry if you want to participate… Because the cutoff deadline for the next payout is September 10th… To find out more… [[Watch Video] How to Get Started With “Amazon’s Secret Royalty Program”…]( -- What This Means for Your Money Overall, the Fed manipulates the bond market to achieve its desired outcome. It targets banks through the yield curve. And by causing banks to pull back on lending, it intentionally causes a recession. We’re already witnessing the unintended consequences of the Fed’s actions. Bank failures this year are even eclipsing the carnage seen during 2008’s financial crisis. And I expect there’s more fallout to come. In fact, on July 31, the Federal Reserve and financial elites are set to enact a major change to the very nature of our money. It will upend the way we interact with the financial system – and the way the financial system interacts with us. And with the recession indicators flashing, now is not the time to sit idly as this situation unfolds. That’s why my colleague Nomi Prins hosted an emergency briefing last night called Countdown to Chaos. In it, she explained what’s about to happen to our financial system… and how you can position yourself ahead of what’s coming. If you missed it, you can watch the replay by clicking [here](. Remember, don’t get swayed by signals from the stock market. While investors breathe a sigh of relief that there’s a better economy ahead, there’s a more sinister message coming from bonds. Regards, Clint Brewer Analyst, Rogue Economics P.S. In her special briefing last night, Nomi revealed one way you can prepare for the volatility that’s about to ripple through our markets. It involves one little-known asset with the potential to deliver as much as 50x profits. If you missed the event, [click here]( to watch the replay. But make sure you do it quickly before our publisher takes it down. --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Inside Wall Street Feedback). MAILBAG Do you think the U.S. will see a recession by May of next year? And did you check out Nomi’s special briefing last night? If so, what did you think of it? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Inside Wall Street Feedback). IN CASE YOU MISSED IT… [New Cash Law Will Be Disaster for Savers]( New law has expert warning seniors and retirees to beware. There’s a darker truth behind this political event… [Read The Full Story Here.]( [image]( [Rogue Economincs]( Rogue Economics 55 NE 5th Avenue, Delray Beach, FL 33483 [www.rogueeconomics.com]( [Tweet]( [TWITTER]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. 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