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Lawrence McOchillo

Could the recent sell-off in US stocks lead to a recession?


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The recent sell-off in US equities is not likely to cause a recession given that it is mostly driven by fear about the impact of the coronavirus on global economic growth. However, the global economy is still in danger of a recession given the recent economic slowdown caused by the US-China trade war that started in 2018.

Investors have cause to worry about the recent inversion of the US 10-year and 3-month bond yields, which have been followed by recessions in the past. Regardless, I still think that a US recession is not on the cards now given that the US just signed a major trade deal with China, which should benefit the US economy over the short-term.

Recent data from the US also shows that the country's economy is doing much better than that of its global peers including China, Japan, and Germany. It is true that global economic growth has declined significantly, but a recession is still a bit far off. However, you should be cautious while trading the global equity markets given the current volatility.

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