On Tuesday, after President Donald Trump announced the administration would be delaying planned tariffs on Chinese goods until after Christmas, the markets reacted as you’d expect they might — the Dow Jones, for instance, saw modest gains of hundreds of points.
But hours after the announcement, the market stagnated for the rest of the day. Overseas, the markets barely budged, and some actually ended up in the red, due to economic indicators that many say point to a recession heading our way soon, Reuters reported.
Treasury yields are inverted, and two-year bonds are rising above the rates that 10-year bonds are showing. It’s the first time that’s happened since before 2007, when the Great Recession hit, and is generally a sign that a recession is impending.
As prior reporting from HillReporter.com has pointed out, yield curves on the U.S. bond markets are rarely wrong when it comes to predicting gloomy economic futures. In every recession studied of the last seven that have occurred, a drop in the markets was preceded by such yield curves inverting. Similarly, a yield curve has never inverted without a recession of some kind following it.
There she goes… US Treasury yield curve – a leading recession indicator – goes negative for the first time since 2007.
…taking equities down with it, the day after a big spike on trade relief.https://t.co/Vc5ueqVUOH
— Kayla Tausche (@kaylatausche) August 14, 2019
Foreign markets did not respond to Trump’s delay on tariffs the way many had hoped.
“It’s almost as if global investors either don’t buy the tariff delay as a sign of real progress in the U.S.-China trade war, or have been too consumed by further evidence of global economic weakness to care, BMO Capital Markets strategist Stephen Gallo told Reuters.
Wall Street responded accordingly on Wednesday. At the opening bell, the Dow Jones Industrial Average was down by 244 points, and descended downward from there. At press time, the Dow was down by more than 400 points. Other American-based markets, such as the S&P 500 and Nasdaq, saw similar declines.
A recession would be bad for the economy, and may also be detrimental to Trump’s re-election chances in 2020. Incumbent presidents with positive economies generally fare better than those who preside over troubling ones.
Trump has frequently touted the present economy as the greatest its ever been in the U.S., but several fact-checkers have pointed out that, while the economy is doing well, it’s been better, based on other economic indicators outside of Wall Street.
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Chris Walker is a freelance writer based out of Madison, Wisconsin. A millennial with more than a decade of journalism experience, Chris aims to provide readers with the latest and most accurate news of national importance. Chris likes to spend his free time doing activities in his community with his family.