2024 Crypto Predictions: Mid-Year Scorecard

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The U.S. 10-year Treasury yield fell below the 2-year yield on Monday, marking a record 706 days of inversion in the yield curve, the longest such streak in bond market history. An inverted yield curve is often seen as a precursor to recession.

The yield on the 10-year note dropped to 3.72% on Monday, while the 2-year yield rose to 3.74%. This marks the first time since April that the 2-year yield has been higher than the 10-year yield.

The inversion of the yield curve has been closely watched by economists and investors as a potential sign of an upcoming recession. However, other key indicators, such as consumer spending and corporate earnings, have remained strong this year, mitigating the impacts of inflation and supply chain issues to some extent.

“The yield curve is screaming recession, but other data points like consumer spending, unemployment, and corporate earnings are showing a different story,” said Bill Stone, chief investment officer at Avalon Wealth Advisors.

The U.S. economy grew at an annualized rate of 1.3% in the third quarter, slowing from the 2.6% growth rate in the second quarter. This slowdown was largely attributed to a decrease in government spending and an increase in imports.

Consumer spending, which accounts for about two-thirds of U.S. economic activity, increased at an annualized rate of 1.7% in the third quarter, slowing from the 2.1% growth rate in the second quarter. This slowdown was likely due to the impact of inflation on household budgets.

Corporate earnings increased at an average annualized rate of 5.3% in the third quarter, slowing from the 10.2% growth rate in the second quarter. This slowdown was largely attributed to the impact of rising interest rates on corporate profits.

The unemployment rate in the U.S. fell to 3.5% in September, down from 3.7% in August. This marks the lowest unemployment rate since December 1969.

Jobless claims, which measure the number of people filing for unemployment insurance, increased by 2,000 to a total of 217,000 for the week ending October 22, according to the Labor Department. This is still near the lowest level in 53 years.

Meanwhile, corporate bankruptcies have increased significantly in 2024. According to data from S&P Global Market Intelligence, there were 2,040 corporate bankruptcies filed in the U.S. through October, up from 1,244 during the same period last year. This marks the highest number of corporate bankruptcies since 2011.

The increase in corporate bankruptcies is largely attributed to the impact of rising interest rates, inflation, and supply chain issues on businesses. Many companies that took on large amounts of debt during the pandemic are now struggling to repay it as interest rates rise.

“Higher rates make it more expensive for businesses to borrow money and service their debt,” said Dan DiMicco, former CEO of Nucor and author of “American Made: A Patriot’s Guide.” “This can lead to financial distress and, ultimately, bankruptcy for some companies.”

Rising interest rates, inflation, and supply chain issues have also contributed to a decline in mergers and acquisitions (M&A) activity in 2024. According to data from Refinitiv, the total value of announced M&A deals involving U.S. targets fell by 43% to $1.1 trillion in the first nine months of the year.

This decline in M&A activity marks a sharp reversal from the record-breaking pace of deals in 2023, when the total value of announced M&A deals involving U.S. targets reached $1.9 trillion.

The slowdown in M&A activity is largely attributed to the impact of rising interest rates, inflation, and supply chain issues on corporate earnings and valuations. Many companies are now hesitant to acquire other businesses at high prices, especially given the uncertain economic outlook.

“The M&A market has cooled off significantly in 2024 as rising interest rates, inflation, and supply chain issues have made corporations more cautious about acquiring other businesses at high prices,” said Bill Stone, chief investment officer at Avalon Wealth Advisors.

Despite the slowdown in M&A activity, there were still several notable deals that closed in 2024, including Microsoft’s $68.7 billion acquisition of Activision Blizzard, Broadcom’s $61 billion acquisition of VMware, and Chevron’s $33.2 billion acquisition of Renewable Energy Group.