Phase one of the coronavirus-induced economic shock happened with stocks falling 20% and the government and high-grade corporate bonds rallying.
Even though an inverted yield curve has just about a perfect record of predicting recessions, some believe that, because of the Federal Reserve’s unprecedented involvement in the economy, this time it will be different.
Debt in the U.S. government, individual, and corporate is much higher today than it was before the 2008 financial crisis.
The U.S. like Japan is coming off two enormous financial bubbles. The Internet stock market bubble of 1999, and the housing bubble of 2006. It also has high levels of government debt and near-zero interest rates.