Vanguard, the $5 trillion asset management firm released projections over the past week that predicted that the chances of a recession by 2020 are steadily increasing.
The Vanguard projection is based largely on interest rate expectations based on a flattening yield curve, with the Federal Reserve expected to raise shorter-term rates faster than longer-term ones. The other is rising credit risk for below-investment-grade bonds.
CNBC cited that, “In spite of accelerating consumer and producer prices, fixed-income markets showed a yield curve with declining inflation expectations.”So while consumers may see prices starting to rise, Wall Street thinks that there will be little or no inflation in the near future due to rise in short term interest.
While this may seem confusing and not very promising, it is important to be mindful that this is a forecast and not a fact of what is to come.