Published on November 12, 2023

Is There Really a Recession Coming? Here’s What We Know

Over the past few months, the market has been in chaos because of the U.S. Treasury yields. Last month, the 10-year Treasury yield surpassed 5% for the first time since 2007, adversely affecting the stock market.

What’s more, a volatile Treasury negatively impacts consumers (i.e., mortgage rates, personal loans, credit card debt, etc.). When the Treasury yields rise, the cost of borrowing just about anything increases. This could be the last leg that catapults us into a world where a recession appears imminent. So, what does that mean for investors – or anyone in the financial services industry?

What is the 10-year Treasury yield?

The U.S. Treasury’s roots date back to 1775 when America’s founders first strategized on different ways to fund the Revolutionary War. The solution they reached involved issuing cash that doubly functioned as redeemable “bills of credit”. This alone raised enough capital to support the revolution. However, it’s also sent the country into its first official debt. As the debt piled up, war notes rapidly decreased in value. This one move would spark a multi-century snowball effect of massive debt that persists through the present day.

Enter Treasury yields. In short, this is the interest rate at which the U.S. government borrows money. It represents the return an investor or borrower can expect to receive if they purchase a note and hold it until maturity. In 1870, in an ongoing effort to control massive debt and borrowing woes, Congress passed an act that granted redemption privileges for stocks and bonds after 10, 15, and 30 years, respectively. In 1962, it was solidified at the 10-year yield, now the prime benchmark used to determine most interest rates across the U.S.

What happens when the 10-year yield rises?

In today’s world, how much power does the U.S. Treasury have over the market as we know it? The short answer: quite a lot. The 10-year Treasury yield is often regarded as the main indicator of the economy's overall health. It directly influences investor’s actions and sentiments. It’s the key reference rate for financial instruments such as bonds, mortgages, automotive loans, personal loans, and credit cards that help Americans access common consumer goods.

The changes in the 10-year yield are affected by many economic factors, including supply chain events, market expectations for the future, inflation, economic status, and geopolitical events on a global scale. Investors, economists, and policymakers keep a close, watchful eye on this daily to make sound, informed decisions on their next money moves.

How does this directly correlate to the possibility of a recession?

If there is indeed a recession coming, it’ll likely be attributed to the recent rise of the Treasury yield. For context, most of this year and last, in an effort to combat record inflation, the Federal Reserve resorted to aggressive interest rate hikes (although they have vowed time and time again to put an end to it) that have taken place nearly every month since inflation started to rise in mid-2022. This domino effect has bled into other financial market facets – including the 10-year yield.

Here’s what is directly affected when that happens:

  • Recession Coming: Borrowing costs increase

    Borrowing costs increase: Higher interest rates in just about every area of consumer borrowing. Consequently, consumers facing increased interest costs likely reduce spending, and businesses start to scale back on their investment goals.

  • Recession Coming: The housing market takes a hit

    The housing market takes a hit: Higher rates mean higher mortgages. This leads to reduced demand and purchase prices in the housing market since consumers are unable to afford as much with regular monthly payments increased.

  • Recession Coming: Bond prices fall

    Bond prices fall: The cause: Treasury yield goes up. The effect: prices of existing bonds in the market fall. Fixed interest payments on existing bonds become less attractive than the higher yields available on new bonds. Bond investors are in for possible capital losses.

  • Recession Coming: The stock market declines for the worse

    The stock market declines for the worse: Rising Treasury yields equal heavy, negative pressure on stock prices. This happens because higher yields make bonds and other fixed-income investments more attractive than stocks.

When might a recession be coming?

The pressures that transpire from the above effects begin to function as a bubble that is only waiting to burst. Ahead of a full-on recession that could be coming, there are three main signs that experts say we should be paying attention to:

  • Recession Coming: A conscious change in spending trends

    A conscious change in spending trends: The market is volatile, and consumers are navigating a ton of risks. What once was a joyful merry-go-round of post-pandemic consumer spending has become a race to hold on to the last of the savings. Credit card debt and delinquency rates are also rising, suggesting that the pendulum of heavy spending (and borrowing) may be starting to swing the other way.

  • Recession Coming: High borrowing costs

    High borrowing costs: Speaking of borrowing, we mentioned this earlier, but these costs will only continue to rise if interest rates do as well. This trend is simply a cold threat to overall economic growth, especially if the data persists in telling the same story. For example, consumers looking to buy will likely be turned off by sky-high interest rates; prospective car buyers will probably want to put a halt on automotive loans. From this, we’ll start to see negative effects on the economy almost immediately. Only time will tell us about the magnitude of damage that said the threat will really bring.

  • Recession Coming: Macroeconomic risks

    Macroeconomic risks: On a macro level beyond the consumer horizon, threats persist – from every direction. Rising gas prices. War in the Middle East. A bleak housing market coupled with a sour consumer outlook. These are just a few. But if the economy is hurting, it’s only a matter of time before we all do. The immediate remedy for this is to be wise and alert, with our ears to the ground for both major and minor day-to-day changes.

In the same breath, it’s good to note that we have been here before. In 1929. In the 1970s. In 2008. Still, America has proven time and again how resiliency runs deep in the veins of our hearts as a country. The best thing investors and active financiers in the industry can do now is brace for the changes.


As a financial advisor, navigating a period of sustained inflation and interest rates is challenging. Now, with a looming recession, it may be crucial to retool investment offerings and adopt value-driven strategies for clients. Recent years have highlighted the importance of differentiation and specialized expertise, particularly in an inflationary and rate environment not witnessed in decades. These events call for reconsidering traditional models like the 60/40 portfolio and, instead, incorporating elements of asset diversification that align with long-term client objectives. Allocating to managers with a proven track record of navigating multiple market cycles could be a potential solution. Through experience in leveraging dislocations and identifying opportunities within stressed markets, many of these managers have weathered prior cycles. They could potentially play a vital role in diversifying your clients’ portfolios.


  1. Markets Insider, October 2023. “US stocks tumble as 10-year Treasury yield hits 5% for first time since 2007.”
  2. Business Insider, August 2023. “If you want to know where the economy is headed, don’t watch the Fed. Track this interest rate instead — anything above 4% is bad.”
  3. Business Insider, October 2023. “A recession is about to hit the US economy and these 3 warning signs are defying the consensus view, Raymond James says.”

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