Has the Recession Already Started?

As of April 5, 2022, the Atlanta Fed's model projects 0.9 percent GDP growth in Q1. Government economists don't have to be massively undercounting inflation for this to be a recession already. At an 8 percent CPI, it would only take a 12.5 percent error rate to wipe out all the growth. The nominal GDP climbs 9 percent and 8 percent of that is price increases, there is 1 percent real growth. If inflation is 9 percent, zero growth. If inflation is 10 percent, the real economy contracted 1 percent. I'm not making a call one way or another. I merely wish to point out that a small error wipes out small growth. That prices are experiencing volatility unseen in 50 years. That price, economic and geopolitical changes are happening faster than models can account for.

As for the yield curve, the 2s10s has steepened and is no longer inverted. Does a steepening yield curve mean that a recession is delayed? Or does it mean the recession is already underway because the bond market has been incorrectly expecting lower bond yields and lower inflation?

I don't make macro trades based on "the economy" so I find recession talk mostly academic. It matters, but I don't care if the economy is in recession or not for trading, I care if the asset is a buy or a sell. Sectors, commodities and individual stocks move up and down for their own reasons. A bear market will be underway long before a recession is announced. A bull market will be long underway before most people realize the economy turned a corner. As I've argued in past posts, it's likely inflation already peaked if history follows the script from 2008-2020. The public outcry over inflation is itself a sign it has peaked. Whether a short-term or long-term peak remains to be seen. Weak growth can also devastate sectors of the economy for years on end. See commodities from 2011 to 2020. It wouldn't be shocking for unemployment to fall with real wages because people have to get a job, or take on another job, if they cannot afford food, housing or energy. That would be hellish for financial assets in general, it would get politicians ejected from office, yet it might not technically be a recession.

Conclusion: I don't see anything good coming from a steepening yield curve.