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Prediction Markets on Recession by January 2021

Summary:
PredictIt, accessed 4pm Pacific today: Why the recent movement? One piece of information, the Manufacturing PMI: Source: TradingEconomics.com. Below 50 indicates contraction. In addition, despite the assurances of the administration, markets do not seem to believe in an incipient turnaround: Figure 1: 10 year-3 month Treasury spread, (blue), 10 year-2 year (red) and 5 year-3 month (green), all in %. Federal Reserve via FRED, Treasury, author’s calculations. All this against a backdrop of elevated (to say the least) policy uncertainty. Figure 2: Economic Policy Uncertainty index (blue). Source: policyuncertainty.com accessed 8/22/2019. Note that big data in the form of Google Trends suggests heightened interest in the possibility of recession. Figure 3: Google Trends: search word

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PredictIt, accessed 4pm Pacific today:

Prediction Markets on Recession by January 2021

Why the recent movement? One piece of information, the Manufacturing PMI:

Prediction Markets on Recession by January 2021

Source: TradingEconomics.com.

Below 50 indicates contraction.

In addition, despite the assurances of the administration, markets do not seem to believe in an incipient turnaround:

Prediction Markets on Recession by January 2021

Figure 1: 10 year-3 month Treasury spread, (blue), 10 year-2 year (red) and 5 year-3 month (green), all in %. Federal Reserve via FRED, Treasury, author’s calculations.

All this against a backdrop of elevated (to say the least) policy uncertainty.

Prediction Markets on Recession by January 2021

Figure 2: Economic Policy Uncertainty index (blue). Source: policyuncertainty.com accessed 8/22/2019.

Note that big data in the form of Google Trends suggests heightened interest in the possibility of recession.

Prediction Markets on Recession by January 2021

Figure 3: Google Trends: search word “recession”. Accessed 8/22/2019, 5:10pm Pacific.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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