Known Unknowns: Uncertainty, Volatility, and the Odds of Recession

Even as the financial markets have rallied in early 2019, recession concerns have dominated investor discussions. We continue to believe that the U.S. economy will avoid recession this year. However, economic policy uncertainty increased and financial conditions tightened significantly in late 2018 and early 2019. We explore the extent to which these twin risks are expected to spill over to the real economy.