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Financial Fundamentals

Deutsche Bank Study Claims 100% Likelihood of U.S. Recession

Alexandra Ardelean

Hey everyone, Marco here from Whiteboard Finance. In this video, we're going to be talking about recession indicators and a recent study that was done by Deutsche Bank. This study claims that there is a 100% likelihood of a U.S. recession and it warns of an American boom and bust cycle.

So let's get into it.

Deutsche Bank has just published a study that claims there is a 100% likelihood of a U.S. recession and warns of an American boom and bust cycle. The study is led by Jim Reid, head of global economics and thematic research at Deutsche Bank.

The study analyzed 34 recessions since 1854 and identified four key macroeconomic triggers for recessions. The first indicator is rapidly rising interest rates, with a historical hit ratio of 69%. Short-term interest rates have risen by 2.5 percentage points over a 24-month period before 69% of past recessions.

The second indicator is rising inflation, with a historical hit ratio of 77%. A 3% rise in the Consumer Price Index (CPI) over two years has preceded 77% of past recessions.

The third indicator is an inverted yield curve, with a historical hit ratio of 74%, rising to 79.9% since 1953. An inverted yield curve has been present since June or July of 2022.

The fourth indicator is soaring oil prices, with a historical hit ratio of 45.9% for predicting U.S. recessions. Brent crude oil prices have risen roughly 30% since June to over $94 a barrel.

Geopolitical events can affect oil prices and their role in predicting recessions. For example, the Russian invasion of Ukraine could lead to further supply disruptions and price increases.

If oil prices continue to rise due to geopolitical tensions or other factors, it could put additional pressure on consumers and businesses, potentially leading to economic headwinds.

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Now back to the video.

I'm not saying that we're going into a recession tomorrow or next week or next month or even next year but I do think that we are in for some type of economic downturn based on the data that I've been seeing.

I know that unemployment is low but I also know that debt levels are high so I'm not sure if this is going to be like the traditional recession where people get laid off and then they can't find jobs because companies aren't hiring because they're trying to save money.

I think this might be more of like an economic unraveling where people are just so financially strained that they can't afford anything anymore so they stop spending money which causes companies to lay people off which causes more people to stop spending money which causes more companies to lay people off and so on and so forth.

So let me know what you guys think in the comments below. Do you think we're headed for some type of economic downturn? If so, what do you think will trigger it?

As always, please like this video if you found it helpful and subscribe if you haven't already. Also consider joining Whiteboard Finance University using code YOUTUBE for a discount on your first month.

Thanks for watching and I'll see you in the next one!