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ALERT: “This Happened Prior To 6 Of The Last 7 Recessions”

Thursday, July 12, 2018 8:33
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This report was originally published by Tyler Durden at Zero Hedge

“This less-followed indicator has a good enough relationship with recession risk during the last 50 years that it should not be ignored,” warned Jim Paulsen, Leuthold’s chief investment strategist, in a note to clients this week.

Having warned last week that “it’s been too quiet, for too long,” Paulsen now sees the potential catalyst for the market’s next move as low-rated investment-grade credit spreads blow out beyond an historically crucial level.

As Bloomberg reports, for the first time since just prior to the 2007-2009 recession, premiums on the lowest-rated tranche of investment-grade U.S. corporate bonds have risen to 2 percent after being below that level, according to data compiled by the Minneapolis-based research group.

The analysis looks at the gap in yields between corporate debt rated Baa by Moody’s Investors Service and those on 10-year Treasuries.

“We are not sure why a 2 percent credit spread has been so prescient in predicting recessions since 1970,” Jim Paulsen, Leuthold’s chief investment strategist, wrote in a note to clients Monday. That happened either during or prior to six of the past seven recessions, he said.

Given that the “subpar” economic recovery has relied on unconventional monetary policy and fiscal stimulus, “would it be shocking if it ended before traditional recession indicators provided warnings,” he wrote.

Of course, this trend fits with the recession-imminent warnings coming from the Treasury market…

But, according to CNBC, you can ignore that ‘never-been-wrong’ indicator because this time is different due to ECB/BoJ bond buying.

This article has been contributed by SHTF Plan. Visit www.SHTFplan.com for alternative news, commentary and preparedness info.



Source: http://www.shtfplan.com/headline-news/alert-this-happened-prior-to-6-of-the-last-7-recessions_07122018

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