Can the bond market sniff out recession before the Fed goes too far?

When the Dow Jones Industrial Average plunges 1,000 points in a single day, as it did Thursday, it’s hard not to wonder if a crash is coming.

It also came as focus shifted from Powell’s comments that a larger 75 basis-point rate increase wasn’t something the Fed was actively considering, to what else he said, namely, that the Fed won’t “hesitate” to deliver higher interest rates if they are needed. Like watching for yield curve inversions, the 10-year Treasury yield also has a track record of signaling recessions before they occur.

“And the ongoing situation with Russia’s war in Ukraine, coupled with pressures with the zero-COVID policy in China are headwinds to addressing the supply side of equation,” he said Friday.

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