Macroeconomics

Recession Forecast

12-month forward probability built from yield spreads, inflation, unemployment, permits, sentiment, and more.

This chart displays the model’s predicted probability of a recession occurring 12 months into the future, based on key macro indicators.

12-Month Forward Recession Probability

Understanding the Recession Risk Model

What is this model?

A proprietary machine-learning ensemble trained on decades of economic history (yield curve dynamics, inflation, unemployment, financial conditions) to estimate recession odds 12 months out.

How to interpret it

The line tracks the model’s probability output. Rising values signal elevated macro risk. Gray bands mark NBER recessions to gauge historical accuracy.

Practical applications

  • Adjust portfolio risk when probabilities spike.
  • Rotate into defensive sectors or reduce leverage ahead of stress.
  • Use as high-level context alongside micro setups.

Methodology

How the recession probability is produced

The chart reads from app/recession_forecast.csv, which contains the latest output of our ensemble model. The model is trained on FRED data (yield curve spreads, inflation, unemployment, permits, claims, sentiment, and credit) dating back to the 1960s.

Key FRED inputs

  • Yield curve — Term spreads (10y-3m, 10y-2y) and the shape of the Treasury curve point to future policy moves.
  • Labor — Unemployment rate, jobless claims, and prime-age employment-to-population ratio capture slack.
  • Inflation & policy — Core inflation momentum and the real federal funds rate shape easing odds.
  • Housing & credit — Building permits, months' supply, and high-yield credit spreads catch late-cycle stress.

Regime vocabulary

Stable (< 25%)
Macro data still points to expansion; historically associated with economic growth.
Watch (25% – 50%)
Model detects building fragility — monitor offensive positioning.
Alert (> 50%)
Recession is the base case within 12 months and defensive positioning is warranted.

Additional context

  • Probabilities update whenever any of the upstream FRED series are refreshed, typically weekly.
  • Gray bands in the chart mark NBER-defined recessions to benchmark how the model performed in prior cycles.