Bank of America raises chance of a recession to 1 in 3

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Bank of America raises chance of a recession to 1 in 3


Traders and financial professionals work ahead of the closing bell on the floor of the New York Stock Exchange.

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Recession risk is rising, according to Bank of America.

Based on the most recent data, the bank’s global economist now sees a greater than 30% chance of a recession in the next year.

“Our official model has the probability of a recession over the next 12 months only pegged at about 20%, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance,” Bank of America global economist Ethan Harris said in a note to clients Monday.

Uncertainty around the U.S.-China trade war and a global economic slowdown have caused interest rates to tumble and weighed on the major stock averages in recent weeks. Last month’s jobs report showed a strong consumer, but business investment is low as investors and business owners juggle new tariffs and fiscal policy uncertainty.

Harris said some economic indicators are “flashing yellow,” signaling a coming recession.

For one, the yield on the 10-year Treasury yield dipped below the yield on the 3-month, inverting part of the yield curve. This inversion, although a recession indicator, is not as worrisome as an inversion of the 2-year yield and the 10-year yield, which has yet to occur.

Harris also said that three of five economic indicators that track business cycles — auto sales, industrial production and aggregate hours worked — are at levels reached right before previous recessions.

Harris said the “bright spot” of the economy is that initial jobless claims remain low.

—With reporting from CNBC’s Michael Bloom.



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