In his latest letter, Jeremy Grantham says the most ancient recession predictor is indicating a recession is pending. Here’s an excerpt from the letter:
Other factors suggesting a long or delayed decline include the fact that we start today with a still very strong labor market, inflation apparently beginning to subside, and China hopefully regrouping from a strict lockdown phase that has badly interfered with both their domestic and international business.
But the most ancient and effective predictor of future recession, the 10-year minus 3-month yield spread (see Exhibit 2 below), is now clearly signaling recession within the next year. This spread has gone negative only 8 times in the past 50 years and all 8 times have been followed by recessions.
To rub it in, there have been no other recessions. That is, every one of them was preceded by a negative reading. Not bad.
You can read the entire letter here:
Jeremy Grantham: After A Time Out, Back To The Meat Grinder
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