Why investors are increasingly worried about recession in America

America’s stockmarket been this year that only a fool would predict mid-week (or even mid-Friday) whether prices will end the week up or down. This time the answer was up: at the market’s close on May 27th, the 500 index of leading American shares had broken a seven-week losing streak. Thus far, at least, it has avoided (just) the 20% peak-to-trough decline that is the informal definition of a . But there are signs that America’s markets are entering a new, more worrying phase.From January until early May, falling share prices could be put down to the effect of , as fixed-income markets responded to guidance from the Federal Reserve that interest rates would be going up a lot and fast. Higher interest rates reduce the present value of a stream of future company profits. Shares were marked down accordingly, especially those of technology firms whose profits could be projected furthest into the future. But in recent weeks share prices have kept falling, even as bond yields have dropped back. This combination points to fears of recession. Indeed, the mix of Fed tightening, slowing and rising production costs has the ominous feel of the later stages of a business cycle. The expansion is barely two years old. Yet investors are already worried that corporate profits are under threat.