Topline: Recession fears—which have gone up and down and back up just in the past nine months—suddenly seem here to stay for the foreseeable future, as global growth slows to a crawl amid trade war fears. Here’s what happened this week, along with key reactions:
- Goldman Sachs issued a note Monday saying a trade deal between the U.S. and China is not expected to be made before the 2020 presidential election.
- On Tuesday, Trump walked back planned tariffs on China, delaying some until after holiday shopping, his first acknowledgment that tariffs impact U.S. shoppers.
- On Wednesday, Germany’s economy was reported to have shrunk as it contends with Trump’s tariffs and trade war with China.
- Trump also blasted the Federal Reserve Wednesday on Twitter, as he blamed the central bank for dragging down the U.S. economy and returns on government bonds.
- Then Wednesday’s close registered the worst stock performance of 2019, as investors were spooked by Germany, China and the much-discussed inverted yield curve.
- China responded on Thursday by promising a retaliation, threatening “necessary countermeasures.”
- Global markets responded, with the Nikkei and FTSE 100 closing down over 1% Thursday.
- By Friday, the Dow rebounded 300 points before closing bell, while the S&P recovered 40 points and the tech-heavy NASDAQ bounced almost 130. But the Dow still lost 1.5% for the week, while the S&P edged slightly down at 0.3%.
- Globally, the FTSE 100 regained 50 points, while the Nikkei recovered 13 Friday, but both indexes ended the week lower than where they started.
- Analysts pegged the stock market’s slight Friday recovery to an increase in government bond yields.
Key background: The yield curve is the difference in interest rates (or returns) between short-term and long-term bonds. Usually, investors get more money when they invest in 10-year bonds over three-month short-term bonds. The yield curve is also a pretty accurate historical predictor of recessions, so when it happens, economists and investors alike get worried. This year, the yield curve inverted in March and May, and it happened again Wednesday, contributing to the stock market’s tumble.
Why Trade War Plus Yield Curve Equals Recession (John T. Harvey)
Markets Panic For The Second Week In A Row (Milton Ezrati)
Fed Poised To React Swiftly To Persistent Yield Curve Inversion, With More Rate Cuts (Pedro Nicolaci da Costa)
I’m a New York-based journalist covering breaking news at Forbes. I hold a master’s degree from Columbia University’s Graduate School of Journalism. Previous bylines: Gotham Gazette, Bklyner, Thrillist, Task & Purpose, and xoJane.