Recession Risk Outlook 2026
Leading indicators, yield curve, Sahm rule, and composite recession probability models.
Data as of · Outlook refreshed
Current State
Recession calls are more useful as probability distributions than binary predictions. Composite leading indicators and spreads have the best track record; single indicators are noisy.
Macro Regime Context
Our July 30 regime note kept a stagflation label while the trajectory turned toward reflation, and for recession work the question was which leg was cracking. It was the inflation leg: realized prices cooled while jobless claims fell and the unemployment rate ticked down. Growth evidence stayed split, since our own quarterly nowcast, more than halved since mid-June, still argued for a stall. Cooling prices against firmer labor is the least recessionary mix available, which is why our composite sits low in its own 52-week range. The risk to that reading runs through energy squeezing real incomes rather than through any classic labor trigger.
Full regime analysis →Key Metrics
The scariest numbers on the recession board are percentages off tiny bases
The smoothed US recession probability rose 100% over 90 days. It reached 0.6%.
That is the shape of most of the bearish arithmetic on this page: a large percentage move off a base small enough that the move carries little weight. Our own composite has a milder version of the same problem. CVRP printed 15 on August 1, up 36.36% over 30 days and 50% over 90, which reads badly until you set it against a 52-week high of 51 and a low of 6. Fifteen sits nearer the floor than the ceiling. The composite also fell 31.82% in the seven days into that print, so the quarter and the week disagree about direction.
Levels are where the recession case loses. The Sahm rule indicator came in at 0.07 in its June 1 print, matching the bottom of its 52-week range and 65% below where it stood 90 days earlier. Sahm's own trigger sits at 0.5. Core capital goods orders, the nondefense ex-aircraft series, printed 85393 on that same June 1 date, the top of a 52-week range whose floor is 77591, and 2.52% higher over 90 days. Firms ordering equipment at the best level of the year are not the leading edge of a downturn.
Both of those readings are 78 days old and belong to June, not to the present month. Whatever has happened since, it has not reached the two August-dated series here, the 10Y-2Y spread and financial conditions, and both of those lean away from recession.
How likely is a US recession in August 2026?
Fifteen, on our composite's August 1 print, and best held as a distribution rather than a call. CVRP has run between 6 and 51 over the past year, so 15 puts the economy low in its own recent risk range without ruling anything out. Single indicators here contradict each other; the composite is the only thing that reconciles them, which is the argument for reading recession odds probabilistically rather than as a yes or no.
The strongest support for the low reading is financial conditions. NFCI came in at -0.549 on August 7, 6.19% looser over 30 days and 9.36% looser over 90, against a 52-week low of -0.56217 and a high of -0.45. Our July 30 regime note carried a specific worry about this series: conditions had been measured before credit spreads and equity vol deteriorated in late July, so the next release might catch down to them. Conditions did give back a sliver from that late-July reading, but a sliver is all it was, and the print still sits at the loose end of its year. A recession case needs credit to tighten from here, and the 30- and 90-day changes run the other way.
One reason not to lean on that too hard is the leading index. Brave-Butters-Kelley printed -0.5191225492603063 on June 1, which is below-trend growth, even after improving 60.55% over 90 days. Its 52-week range runs from -1.3158358484606063 to 0.7147533167550647, so the level sits in the lower half of that range and on the wrong side of zero. Direction right, level not yet. That series is the nearest thing here to the six-month leading-index change recession models usually want, and when it last printed it was still sub-trend.
The curve is steepening, and which end is doing it decides the cycle
The 10Y-2Y spread reads 0.51 as of August 14, the freshest observation on this page at four days old. It widened 10.87% over seven days and 21.43% over 30, sitting between a 52-week low of 0.27 and a high of 0.74. Positively sloped and steepening, with inversion nowhere in sight.
Take that at face value and the recession case is finished. Steepening, though, is the most ambiguous signal in this discipline. Curves steepen when growth expectations improve and long yields rise, the benign version. They also steepen when the front end rallies because the market has started pricing cuts, which is the sequence that runs ahead of downturns. This table gives a level and a direction of travel; it cannot say which leg produced either.
Our July 30 regime note hit the same wall and said so, carrying the cut-pricing read at low probability because the two-year and ten-year legs could not be matched to a single day. The question is still open, and the move is more recent than it looks: the net change over 90 days is 2%, against 21.43% over 30, so the spread spent the earlier part of the quarter narrowing and did all of its widening lately. That is precisely the window this board cannot decompose.
A second gap belongs on the record. The curve measure with the best historical record on recessions is the 10Y-3M, the one this topic's own watch list names as most reliable, and it is not the series here. The 2s10s is a close relative rather than the same instrument, and the two do not always turn together. Anyone treating 0.51 as the last word on this cycle is working from a proxy.
The route to a higher reading runs through incomes, and nothing here tracks it
The bear case here does not run through the labor market, where recession watchers keep looking. It runs through real incomes.
Our July 30 regime note kept the stagflation label alive on a technicality while the trajectory turned toward reflation, and the pressure it identified came from energy, traced back to the early-July Hormuz tanker strike our news desk scored as a major oil shock and has since treated as a background condition rather than a live catalyst. Crude re-firing while realized inflation falls squeezes what households have left once the tank is full, and a squeeze of that kind reaches claims and the unemployment rate late, if it reaches them at all. Nothing on this page measures it. The watch list for this topic runs to the Sahm rule, the 10Y-3M curve, the leading index, jobless claims and the ISM. Not one of them tracks household purchasing power.
Which is also why the reassuring numbers deserve a little less weight than their levels suggest. Sahm at 0.07 and core orders at 85393 are June 1 prints, 78 days old, so a turn in either could already have happened without showing up here. The two series fresh enough to speak to August are a curve reading nobody can decompose, the 10Y-2Y spread at 0.51, and a conditions index at -0.549 that has been near the loose end of its year.
The reading the evidence supports is a low probability rising off a low base: CVRP at 15 on August 1, up 50% over 90 days, with 51 the top of its 52-week range. Against that sits the plain fact that a stale print is not evidence of a turn, and that the benign readings are not marginal ones: Sahm at the bottom of its 52-week range, orders at the top of theirs, conditions near the loose end of a year.
Active Scenarios Affecting Recession Risk
What happens to stocks, bonds, and the economy when the yield curve inverts? A historically reliable recession signal explained with live data.
What happens when the Sahm Rule recession indicator triggers? Every historical instance, market impacts, and what it means for your portfolio.
What happens when oil prices spike? Inflation fears, consumer squeeze, recession risk, and the complex impact on stocks, bonds, and the dollar.
What happens when US home prices crash? The wealth effect, banking stress, and cascading economic impacts of a housing downturn explained.
What happens when weekly jobless claims surge? The highest-frequency recession indicator, what levels matter, and how markets respond to rising layoffs.
What happens when the yield curve steepens rapidly? Bull steepener vs bear steepener, recession timing, and the implications for banks, bonds, and equities.
What happens when banks pull back on lending? How tighter credit standards predict recessions, default waves, and the transmission from Wall Street to Main Street.
What happens when the manufacturing sector enters deep contraction? Historical recession correlation, supply chain effects, and market reactions to collapsing factory output.
Recent Analysis
The VIX sits near 16 while Bitcoin’s Fear and Greed Index reads 15. That gap is June’s rates shock showing up in the one asset built to feel it first.
Sticky 3.6% inflation, rising claims, and a Sahm indicator near 0.3. The strict version needs inflation above 4% and unemployment above 5%, and the pipeline is pointed the wrong way.
The Sahm indicator is near 0.28 and claims are rising, yet cyclicals lead defensives and credit spreads are tight. The hard-landing case is on the back foot for now.
From Brazil's rare earth gambit to the Warsh hearing, the signal density is unusually high.
Four converging signals in six hours reveal the fault lines of a reflation-to-stagflation transition.
Multi-gigawatt AI compute deals are now competing directly with energy markets and capital allocation.
WTI at $111 has mechanically pre-loaded the next CPI print, the only question is whether markets are ready for the answer.
While markets fixate on CPI headlines, a quieter upstream surge is building the next wave of consumer price pressure.
St. Louis stress is accelerating at near-regime velocity, and the earnings reckoning it predicts is still six months away.
Strong March payrolls buy the Fed time, but stagflation means more time is precisely what nobody can afford.
What to Watch
- •Sahm rule trigger (0.5 threshold)
- •10Y-3M yield curve (most reliable historically)
- •Conference Board LEI 6-month change
- •Initial jobless claims breakout
- •ISM manufacturing below 45
Frequently Asked Questions
What is the recession risk outlook for 2026?▾
Recession calls are more useful as probability distributions than binary predictions. Composite leading indicators and spreads have the best track record; single indicators are noisy. The live metrics on this page plus the active scenarios below show where the current environment sits on the distribution of possible paths. The outlook is continuously updated rather than locked in as a point forecast.
What should I watch to track recession risk?▾
The core watch list for recession risk includes: Sahm rule trigger (0.5 threshold); 10Y-3M yield curve (most reliable historically); Conference Board LEI 6-month change. The full list is on this page under "What to Watch." These signals are chosen because they are leading rather than coincident, and because they have historically flagged regime transitions before consensus catches up.
How does recession risk fit into the broader macro regime?▾
Every Outlook Hub is anchored to the current Convex regime classification (Goldilocks, Reflation, Stagflation, or Deflation). The Macro Regime Context section on this page shows how recession risk typically behaves in the current regime and what a regime change would imply for these metrics.
Which scenarios could change the recession risk outlook?▾
The "Active Scenarios" section lists scenarios that most directly affect recession risk conditions. Each scenario page includes a probability-weighted asset response, historical precedents, and live trigger metrics. Multiple active scenarios at once are the strongest signal that the outlook is about to shift.
How often is the Recession Risk Outlook refreshed?▾
The key metrics on this page pull live data and refresh within minutes of each release. The regime context and scenario probabilities update daily. The narrative itself is rewritten against the live data on a weekly rotation, with the date of the current version shown at the top of the page, and it is rebuilt sooner when the structural read on recession risk changes materially.
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Outlook hubs aggregate live data, scenarios, and analysis from the Convex research desk. They are educational and for informational purposes only. They do not constitute financial advice.