Walsh added in the blog, “The post-COVID economic cycle has moved unusually quickly. Only 12 months ago economic fundamentals could hardly have looked better, while today global GDP growth is declining rapidly and we are debating whether recession can be avoided in the US, Europe and elsewhere. The spread between two-year and 10-year U.S. Treasuries has been inverted since early July – historically a reliable predictor of recession – while Europe is facing a winter without gas as Russia’s invasion of Ukraine continues to wreak havoc on commodity prices and global supply chains.”
All of these factors effect inflation, bond rates and volatility, the two said, with short term bond rates coming out on top for now.