The probability the U.S. economy will see a recession begin sometime in the next twelve months has started to fall again during the past six weeks. after having hit a double-top.

Since our previous update, the probability has dropped from over 76% to just under 71%, confirming the double-top after having previously peaked at 81% in July 2023.

These probabilities are determined using a recession forecasting method developed for the Federal Reserve Board in 2006. They represent a portion of the economic data and forecasts Federal Reserve officials will consider as they meet from 30 April to 1 May 2024 to review how they will set the level of short term interest rates in the United States in the months ahead. The expected timing of rate cuts by the Fed has been slipping later and later during the past six weeks.

The following chart presents the latest update of the Recession Probability Track. It reveals how that probability appears as the Federal Reserve's Open Market Committee (FOMC) goes into its April 2024 meetings to review and potentially change the Federal Funds Rate (FFR). The FOMC is expected to continue holding the FFR steady at this meeting, but is expected to start lowering this core interest rate at later meetings in 2024. Markets anticipate the Fed may cut this interest rate at its September 2024 meeting.

The Recession Probability Track indicates the probability a recession will someday be officially determined to have begun sometime in the next 12 months. For this update, that applies to the dates between 29 April 2024 and 29 April 2025.

The double-top pattern we've described at the beginning of this article can be better seen by simply tracking the recession probability over time. The next chart shows that forecast probability using the data available from 30 April 1983 through 29 April 2024, with the probabilities shown shifted 12 months into the future to coincide with the end of the period in which they apply.

The probability of recession peaked at nearly 81% on 25 July 2023, making the period from July 2023 through July 2024 the mostly likely period in which the National Bureau of Economic Research will someday identify a point of time marking the peak in the U.S. business cycle before it entered a period of contraction. The prolonged elevation of the Federal Funds Rate combined the deepened inversion of the U.S. Treasury yield curve in recent weeks has made the period between 18 March 2024 and 18 March 2025 the second most-likely period that will include the peak of a business cycle that marks when a recession began.

Another way to interpret the double-top pattern is to consider that it extends the period in which the highest probability of recession is elevated. Under that interpretation, the period in which the probability of an official recession starting would be greater than 70% is running from 25 July 2023 through at least 29 April 2025.

Only time will tell if that's an appropriate way to interpret the data. Looking at the underlying data that's used to determine the recession probability, we anticipate it will continue falling in the near term, making a "triple-top" event unlikely.

Analyst's Notes

The Recession Probability Track is based on Jonathan Wright's yield curve-based recession forecasting model, which factors in the one-quarter average spread between the 10-year and 3-month constant maturity U.S. Treasuries and the corresponding one-quarter average level of the Federal Funds Rate. If you'd like to do that math using the latest data available to anticipate where the Recession Probability Track is heading, we have provided a tool to make it easy to do.

We will continue following the Federal Reserve's Open Market Committee's meeting schedule in providing updates for the Recession Probability Track until the U.S. Treasury yield curve is no longer inverted and the future recession odds retreat below a 20% threshold. We're curious to see how this forecasting method performs.

Previously on Political Calculations

We started this new recession watch series on 18 October 2022, coinciding with the inversion of the 10-Year and 3-Month constant maturity U.S. Treasuries. Here are all the posts-to-date on that topic in reverse chronological order, including this one....

• Recession Probability Falls After Hitting Double-Top
• U.S. Recession Probability Nears a Double-Top
• Probability of U.S. Recession Resurges to Nearly 75%
• U.S. Recession Odds Recede to Two Out of Three Chance in 2024
• U.S. Recession Probability Continues Receding on All Hallow's Eve
• U.S. Recession Probability Starts to Recede
• Probability of Recession Starting in Next 12 Months Breaches 80%
• U.S. Recession Probability on Track to Rise Past 80%
• U.S. Recession Probability Reaches 67%
• U.S. Recession Probability Shoots Over 50% on Way to 60%
• Recession Probability Nearing 50%
• Recession Probability Ratchets Up to Better Than 1-in-6
• U.S. Recession Odds Rise Above 1-in-10
• The Return of the Recession Probability Track

Image Credit: Microsoft Copilot Designer. Prompt: "A signpost with the words 'Recession Ahead?'"

It was a good week for the S&P 500 (Index: SPX) jumped almost 2.7% over the previous week. The index closed the fourth week of April 2024 at 5,099.96.

There were three main drivers behind the positive change from the preceding week:

• The world's biggest publicly-traded company Microsoft (NASDAQ: MSFT) experienced what one analyst called a "drop the mic moment", as its cloud computing division and especially its artificial intelligence (AI) initiatives boosted its bottom line.
• Alphabet (NASDAQ: GOOG and GOOGL) also reported booming earnings and announced it would initiate a dividend to shareholders of its stocks. The company's market cap surged above $2 trillion on that news.
• The expected timing for when the Fed will cut interest rates stopped slipping. The CME Group's FedWatch Tool held steady in anticipating the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% until 18 September (2024-Q3), the same as expected a week earlier, but now looking much less shaky. The tool projects the Fed will cut the rate by 0.25% on that date, which is now expected to hold at its new level for the next six months.

We think that last development to prompted investors to shift their forward investment horizon from 2024-Q4 back toward 2024-Q3. Here's the latest update of the alternate futures chart.

Here are the week's other market-moving news headlines:

Monday, 22 April 2024

• Signs and portents for the U.S. economy:
• IMF's Gopinath says high U.S. deficits fueling growth, higher interest rates
• US consumers on lower incomes face loan stress while banks pull back
• Fed minions feel "no urgency" going into pre-FOMC meeting blackout period:
• Fed hawks and doves: US central bankers see 'no urgency' to cut
• Bigger trouble developing in China as tax cut stimulus takes effect:
• Souring China dreams force Western financial firms to cut costs
• China's state planner warns intensified EV price war on oversupply
• China's Q1 fiscal revenue falls as tax cut policies weigh
• BOJ minions thinking about hiking rates, propping up yen:
• BOJ to project inflation will stay around target, signal chance for rate hike
• ECB minions excited about cutting rates in June 2024, getting tired of following Fed's lead:
• Middle East tensions should not delay ECB's June rate cut, Villeroy says
• ECB governors fear political pressure over Fed-style 'dot plot'
• Nasdaq, S&P, and Dow closed on top as earnings season rolls on
• Wall St stocks end higher with major corporate earnings in view

Tuesday, 23 April 2024

• Signs and portents for the U.S. economy:
• US business activity cools in April; inflation measures mixed
• Oil falls back after robust EU data as Mideast tensions linger
• Shortages key to copper's upward price trajectory to new peaks
• US new home sales rebound to six-month high; rising mortgage rates a concern
• BOJ minions say they'll hike interest rates if inflation rises above their target, preparing to prop up yen:
• BOJ will hike rates if trend inflation accelerates, gov Ueda says
• Yen's slide toward 160 level could trigger action, says senior ruling party official
• Japan may intervene to support yen any time, says senior ruling party official
• Japan issues strongest warning yet on readiness to intervene in currency market
• ECB minions thinking about cutting rates to prop up Eurozone economy:
• ECB governors stick to plan for multiple rate cuts despite global headwinds
• June ECB rate cut firmly in play; but slower easing now expected
• Nasdaq, S&P, Dow rise as Wall Street rebounds for a second straight day; Tesla reports

Wednesday, 24 April 2024

• Signs and portents for the U.S. economy:
• Slow, but solid US economic growth anticipated in Q1; inflation likely heats up
• Oil settles lower as U.S. business activity cools, concerns over Middle East ease
• US refiners' profits to fall from last year but margins remain strong
• Bigger bailouts developing in China:
• Country Garden allowed to postpone first payments on three onshore bonds
• Exclusive: China turns the heat up on cross-border investments in local govt debt, sources say
• BOJ minions thinking more about how and when to prop up yen:
• Yen's slide toward 160 level could trigger action, says senior ruling party official
• ECB minions thinking about what to do after they start cutting rates:
• ECB should be very cautious about post-June rate cuts, de Guindos says
• Nasdaq, S&P, Dow end little changed amid Tesla surge, industrials slump & rise in yields
• S&P 500 ends higher as markets weigh rising yields, upbeat corporate results

Thursday, 25 April 2024

• Signs and portents for the U.S. economy:
• Q1 US GDP shows surprise slowing and uncomfortable inflation
• Oil eases as US demand concerns outweigh Middle East fears
• Fed minions whinging over mixed signals sent by U.S. economic data:
• Confounding US economic, inflation data muddy Fed's rate path
• Weak GDP, strong prices, highlight Fed dilemma
• BOJ minions getting more worried about falling yen, thinking they may have to do something about it:
• Fragile yen could make BOJ's Ueda tilt more towards hawkish stance
• Explainer: What would Japanese intervention to boost a weak yen look like?
• The yen has a yield problem the BOJ can't easily fix
• ECB minions worry about inflation, Eurozone government officials want to make ECB minions worry about more than that:
• ECB most concerned about wages, services, Schnabel says
• ECB should not only target inflation, Macron says
• Nasdaq, S&P, Dow dip after GDP print fans stagflation worries; Meta plunges post earnings
• Meta sparks tech selloff as AI splurge spooks Wall Street
• Wall Street stocks fall as weak GDP growth spreads rate-cut gloom

Friday, 26 April 2024

• Signs and portents for the U.S. economy:
• US inflation increases moderately; consumer spending boosts Q2 outlook
• Fed minions still expected to deliver rate cut in September 2024:
• Fed seen on track for Sept start to US rate cuts
• BOJ minions do nothing to change interest rates to combat inflation or to prop up Japan's currency:
• BOJ keeps low rates, hints of future rate hikes fail to stem yen fall
• Instant view: Bank of Japan keeps rates steady, tweaks JGB-buying language
• Japan frets over relentless yen slide as BOJ keeps ultra-low rates
• Microsoft, Alphabet gains propel Nasdaq to best day since Feb; S&P, Dow also rise
• Microsoft results top Wall Street targets, driven by AI investment
• Earnings Summary: Alphabet tops expectations in Q1; initiates dividend
• Google parent Alphabet reclaims spot in $2 trillion valuation club
• S&P 500 Q1 earnings estimated growth improves; stocks up for week

The U.S. Bureau of Economic Analysis' first estimate of the real GDP growth rate in 2024-Q1 is +1.6%, well below the +2.9% growth rate forecast by the Atlanta Fed's GDPNow toola week ago. The BEA will revise its GDP growth rate estimate twice during the next two months. In the meantime, the Atlanta Fed's GDPNow tool has turned its forward-looking focus to how fast real GDP will grow during 2024-Q2 with an initial forecast of +3.9% growth for the quarter.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a jumping bull wearing a sign"

Choosing the right adjective can be a challenge. For example, let's say you want to precisely describe how good you think something is. Sure, you could just say "It's good", but what if the thing you're describing is better than that?

Perhaps it's "quite good". Or "really good". Maybe it's even "very good", but is that better than something that's really good?

What if it's "awesome"? Is something that's awesome better than something that's very good? Not knowing whether it is or not can lead to some really "mediocre" if not "rubbish" attempts to communicate on your part.

Fortunately, YouGov ran a poll back in 2018 to assign a score to the common English words and phrases Americans frequently use to describe how either positive or negative they think something is. The results are graphically depicted in the following chart, which can be used as a tool to precisely dial your description of how good something is by choosing the right adjective to convey what you really think about it:

Now, when you describe something as "decent", it's because you mean it's better than "alright", but isn't quite as good as something you think is "fine". Isn't that "fantastic", which you now know is just a tick better than "incredible"?

Computing technology continues to increase in capability every year. For hackers with top-of-the-line equipment, it is easier than ever for them to run through millions of combinations of characters to discover your passwords than ever before.

But how long that might take them still depends on how many characters long it is and what combinations of numbers, lower case letters, upper case letters, and special characters you use in your password.

Hive Systems has updated their "Time It Takes a Hacker to Brute Force Your Password" infographic for 2024. Here is the table:

Hive Systems' Corey Neskey's offers a discussion of how they determined the amount of time it would take a hacker to discover your password by trying all possible combinations of different sets of characters.

And for the record, if any of your passwords have been exposed to hackers through a data breach, the amount of time it takes a hacker to get into your account using that password is described as "instantly". Or in other words, it's time for you to change those breached passwords to something much longer with many more kinds of characters.

Here's a problem from real life in early 2024. Let's say you're thinking about taking the plunge and getting an electric-powered vehicle. Whether it's because you want to be seen as someone who cares about the environment or it's because you really like the idea of having the power of instantaneous torque when you step on the accelerator, getting an EV is something you've decided to do.

But because the technology is changing so quickly and because electric vehicle prices are falling, you don't want to lock yourself into owning an electric vehicle. You're looking to lease one for a few years instead.

Sound plausible so far? Okay, let's get really specific. Let's say you've narrowed your options and are thinking about leasing a $38,990 Tesla Model 3, which has a down payment of $2,999. The lease payment is $299 a month for three years, and at the end of the lease term the car’s market value is projected to be about 67% of its original value. What is the effective interest rate you'll pay for this leasing deal?

That's not so easy a question to answer because even if you have the right formula to plug all these numbers into, because there's no straightforward way to rearrange that equation to simply solve it for the interest rate. You'll either have to use trial and error to get to that answer or you'll need to apply some advanced math and run through a series of calculations to get to a precise approximation.

Unless you're willing to trade a little accuracy to get to a still reasonably accurate result. There is a relatively simple equation that can calculate an approximate value for the interest rate, which we've built the following tool to do. If you've accessing this article on a site that republishes our RSS news feed, please click through to our site to access a working version of the tool.

The result of the tool should give you a reasonable estimate of the effective interest rate you're paying to take out this lease. For the default values in our leasing scenario, that result is 5.73%.

But if you have other numbers, by all means, take the tool for a test drive with them! And if you can get the actual lease interest rate, compare your results to see how close the approximation behind this got to the exact result!

Image credit: Tesla Model 3 (2023) by Kazyakurumaon Wikimedia Commons. Creative Commons CCO 1.0 DEED CC0 1.0 Universal .