Another recession could be headed our way, according to experts

Some financial experts believe that a fresh recession could be on its way in as little as six months, if historical figures around interest are anything to go by.

Investment bankers are sounding warnings after they discovered that the “yield curve” on American bonds “inverted,” The Telegraph writes.

What is a 'yield'?

A yield refers to an income returned on an investment, for example a certain amount earned over a particular period of time.

Yields measure income (for example, interest) that an investment earns.

The inversion noted by experts means a yield on a 10-year-bond fell below that on a three-year-bond – alarming because yields that are taken over a longer period of time should get higher returns.

According to Investopedia:

This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession.

Jeffrey Schulze of ClearBridge told The Telegraph that this is “worrying” – though the timing is important.

He said: “A lot of people get concerned about the yield curve inverting, as it has preceded the last seven recessions going back to the Sixties."

The last time a yield curved was in 2007, shortly before the financial recession of 2008.

But is the data conclusive?

Other finance experts say that findings are likely to suggest an upcoming downturn but may not be a signifier of a full global recession just yet.

According to The Independent’s business and finance columnist Hamish McRae, wrote:

There is such a thing as the global economic cycle, with economies speeding up then slowing down, and the duration of that cycle seems to be between seven and 10 years. If you take the last trough as 2009, we are now 10 years into the growth phase, so you would expect some sort of turndown soon.

I am less worried about a serious worldwide recession next year (though there will probably be a mild one) than stagnation through the 2020s afterwards.

Goldman Sachs also doesn’t believe a recession is on the horizon, but does predict a “sharp slowdown” in the market. Speaking to CNBC, a rep recently said:

It’s still our view that we’re not headed for recession in any of the major economies.

We don’t see a recession, but we do see a pretty sharp slowdown…[markets had] got too far into pricing a deeper downturn than we expect.

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