An indicator of American recessions alarm sounds world | USA

According to the Leuthold Group, a recession risk indicator with a "pretty good" record over the last 50 years has just launched an alarm signal.

For the first time since the 2007-2009 recession, premiums for the US blue chip segment with the lowest credit ratings rose to 2% after being below data compiled by the Minneapolis-based research group.

The analysis reviews the difference in return between corporate debt with Baa's rating by Moody's Investors Service and US Treasury bonds maturing in 10 years.

"We do not know why a 2% credit spread has been so prophetic about recessions since 1970," wrote Jim Paulsen, Head of Investment Strategy at Leuthold, in a note. to customers on Monday. . This has happened during or before six of the last seven recessions, he added.

Similarly, Paulsen recognizes that other indicators of the risk of recession do not give the same signal. One of the best-known is the inversion of the US Treasury yield curve, when two-year bond yields exceed those of 10-year marketable bonds, but this is not the case. Is not produced yet.

In addition, the premium for Paulsen's speculative-grade securities has exceeded 2% for virtually the entire period of economic expansion since the end of the Great Recession.

To take into account
"Over the past 50 years, this less-watched indicator has had a sufficiently good relationship with the risk of recession for it to not be ignored," writes Paulsen.

As the "below-average" economic recovery is based on unconventional monetary policy and fiscal stimulus, "it would be shocking to put an end to it before traditional recession indicators give warning", he wrote.

Fears that they will accelerate inflation and the interest rate increase rate of the Federal Reserve have affected investment grade corporate bonds up to the end of the year. present this year. In addition, US companies are taking more loans and their interest costs are increasing.

The Difference Between the Moody's Index Corporate Baa Bond and US Treasury Bonds. with maturity in 10 years rose to 2% on June 28, according to data compiled by Bloomberg. Friday, it was 1.96%.