Deutsche with the note. Everything about this cycle has been fantastically faster than usual so I expect a global recession to begin in H2, 2022.
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Not every Fed hiking cycle leads to a recession, but all hiking cycles that invert the curve have led to recessions within 1 to 3 years. The problem with the Fed hiking cycle that starts today is that there is a decent likelihood that the curve inverts relatively early on. 2s10s peaked at +157.6bps last March and traded as low as+21.9bps last week before settling at around +30bps as we go to print. Piling on, CPI is much higher today than it was in any of those instances, and indeed the second highest at the start of any post-war hiking cycle. Thus there is not only a strong risk that the curve inverts relatively early, but that the Fed will need to continue hiking anyway. Today’s table shows the details of every Fed hiking cycle over the last 70 years alongside the time to recession, yield curve shape, and inflation at the first hike.
