With the turbulent economic status of the United States, many individuals fear the threat of a US recession. According to The Economic Times, the country’s 10-year bond yield dropped significantly, going under the 3-month bond yield. This means that the 10-year bond yield is negative when compared to that of a 3-month period.
Signs of an Impending Recession
The decline in long-term investments returns suggests a fall in economic stability, says The Economic Times. In the past, this situation occurred in 2007 just before the 2008 recession.
Aside from this, experts also specified a few other signifiers that could hint at an economic recession in the US. One of these is the sudden removal of rate hikes implemented by the US Federal Reserves. In the past months, the US Fed has been enacting a rate hike that worried foreign investors, which made the sudden elimination of rate hikes in 2019 concerning.
Effects on Indian Investors
According to analysts, the impact of this instability can vary depending on the gravity of the situation. BOB Capital Markets CEO Ratnesh Kumar says that India’s emerging market can take advantage of a mild situation as it will entail a more lenient US economic policy. However, a severe situation can be detrimental to India’s market as it can affect exportation.
Besides the gravity of the potential recession, the positive or negative impact on Indian Investments also depends on the timeframe. Experts say that short-term effects will be good on India as it will create cash flow.
Meanwhile, analysts say that preventive measures can have huge effects on foreign currencies including the rupee which has always benefitted from US rate cuts. It can also affect equities, gold, and debt markets.