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Invesco argued Friday that a mild recession is still on the horizon, citing the likelihood that the recent interest rate tightening by the Federal Reserve will likely take 12 to 18 months to work its way through the economy.
“Based on the lagged effects of tightening … we believe the US may experience a mild recession in early 2024,” Invesco stated.
Additionally, Invesco noted that recessions typically play out over a four-stage period and we are currently in stage three. See the four steps Invesco outlined:
1. Fed initiates a tightening cycle.
2. Spread between 10-year US Treasury rate and 2-year US Treasury rate inverts.
3. Spread between 10-year US Treasury rate and 3-month US Treasury rate inverts.
4. Recession commences within 1 to 2 years.
Looking at Friday’s trading, the benchmark averages (DJI), (SP500), and (COMP.IND) along with their mirror following ETFs (DIA), (SPY), (VOO), (IVV), and (QQQ) are all notably lower.
