According to John Mauldin, another recession is already here, or will be soon. He states that most recessions are preceded by an inverted yield curve. An inverted yield curve is when long bond rates go below short bond rates. The inversion had to go relatively deep and last for some time to really be reliable as a recession predictor. When he called a recession in 2001 and in 2007, those conditions existed.
Recessions are usually deflationary. Unemployed people reduce spending. However, a recession can be inflationary when there are supply chain problems, like there are now. Then we get stagflation, like we had in the 70s, with falling growth and rising prices at the same time.
He argues that when the US and UK ban imported Russian oil, the total global oil supply may not change much. Russia will sell the oil to China and the US and UK will buy from others. The amounts will eventually be roughly the same. However, the sanctions disrupt the financial methods that Russia has used to buy and sell. China gets oil from eastern Russia. It will take time to build pipelines from western Russia.
He also states that energy price spikes preceded every other recession over the last 80 years. Now we have another energy price spike.
Russia and Ukraine are major wheat producers, so food shortages are also possible. Wheat futures price increases have been hitting their daily limit. Governments in developing countries will have to redirect funds that it would have used for infrastructure to basics like food and energy.
The Consumer Price Index rose 7.9% in February before the war started. The war will drive food and energy prices higher. The Fed’s only tool for bringing inflation under control is to increase interest rates. Higher interest rates can cause an inverted yield curve that results in a recession.
https://www.mauldineconomics.com/frontlinethoughts/another-strange-recession