Josh Steiner, managing director of Stamford-based Hedgeye Risk Management, is warning that the U.S. economy is facing a recession, and he is basing this prediction by citing how similar situations played out in past decades.
“There have been 10 recessions since 1954,” said Steiner in an appearance on “The Call @ Hedgeye.” “All 10 of them have been preceded by a significant rise in short-term rates – so, you’ve obviously got that going on. You’ve got the two-year making fresh highs, getting up to 29 basis points just this month alone, sitting now at 513. You’ve got the 10-year, just blasting off [and] sitting at 463 – that was at 409 the end of August, so that’s moved up a mild 64 basis points in four weeks.”
Steiner also pointed out rising oil prices – up roughly 30% to 35% in the past three months – and recalled how earlier recessions followed oil price spikes.
“If you go all the way back to the mid-1940s, you’ve had 12 recessions since then,” he continued. “And of those 12, eight had been preceded by significant oil price shocks. And then three more had been preceded by more moderate oil price shocks. So, call it 11 out of 12.”
Steiner advised investors to consider the connection of past and present macroeconomic behavior, lamenting that it is “so easy to get lost in the short termism of a lot of things and lose the proper context for where we are in a bigger cycle.”
