Why the outlook for the economy just got worse

Ignore the steep sell-off in stocks — that is an effect, not a cause, of the disruptions remaking the global economic outlook. What matters now are bond yields and commodity prices, the two most vivid indicators of a shifting landscape.

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These market prices are telling us that a recession is becoming more likely in the United States this year, and that it will probably leave scars on the economy for years to come. Worse, it looks like predictions of a “V” shaped downturn with a quick, sharp rebound are probably off base.

“We’ve reached the tipping point where things are feeding off of each other,” said Julia Coronado, president of MacroPolicy Perspectives. “We’re going to lose a chunk of activity and then we’ll grow out of it. That’s the good news. But are we going to boom out of it or crawl out of it? Crawling is looking more likely.”

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