Fed on lookout for recession but still sees strong economy: minutes

The yield curve has been flattening for a while now, especially for longer term (10Y, 20Y, 30Y T-Bills) securities [0, 1, 2].<p>As confidence in the government (i.e through a trade war) dips, as interest rate hikes become more of a reality, and as increasing amount of companies come forth with weirdly worded statements about their &#x27;strong financials&#x27; and &#x27;consistent growth&#x27;, everyone is running for the hills.<p>No one needs to toot their horn when they&#x27;re on a bull run, everyone can see it, and everyone is on their own run. It&#x27;s only when no one can see you&#x27;re having (or you will have) &#x27;strong financials&#x27; that you need to announce it.<p>And it seems like you need someone to announce their strong position to keep the heard mentality of a bull run going on.<p>I very well might be wrong.<p>[0] <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;T10Y2Y" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;T10Y2Y</a> [1] <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;DFII20" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;DFII20</a> [2] <a href="https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;DFII30" rel="nofollow">https:&#x2F;&#x2F;fred.stlouisfed.org&#x2F;series&#x2F;DFII30</a>

I did some research on this about 5 years ago at a former job. Unfortunately, I no longer have access to it, but the slope of the yield curve definitely had some interesting correlations with recessions.<p>My (incredibly simplistic) reasoning for the correlation is that as short term interest rates rise (relative to long term interest rates), investors reallocate money away from risky assets (VC &#x2F; PE &#x2F; Small-Cap Equities) into short term investments (Money Markets, T-Bills). And since risky assets are what really drive our economic growth IMO, we start to see a real slowdown in economic output.<p>While the curve has been flattening, it certainly is not flat (or inverted like it has before). I&#x27;m cautiously optimistic about the U.S. economy over the short term (1-3 years). After that, who knows.<p>The Fed loves to revise data retroactively, so take the following graph with a grain of salt, but they do publish a &#x27;Probability of US Recession Predicted by Treasury Spread&#x27; [1]<p>[1] <a href="https:&#x2F;&#x2F;www.newyorkfed.org&#x2F;medialibrary&#x2F;media&#x2F;research&#x2F;capital_markets&#x2F;Prob_Rec.pdf" rel="nofollow">https:&#x2F;&#x2F;www.newyorkfed.org&#x2F;medialibrary&#x2F;media&#x2F;research&#x2F;capit...</a>

How is the fed gonna sell off its 4.5T in assets including all the housing loans it bought, or is it somehow going to destroy them?