Fear increases for a recession to overturn after a carefully monitored market metric flashes a warning signal, but one strategist told CNBC that the estimated indicator "is predicting absolutely nothing."
The 2-year rate on Wednesday says. The so-called inverted yield curve has historically been seen as a precursor to an economic downturn. US markets fell after the inversion, and the Dow Jones Industrial Average lost around 800 points. The courses turned in the morning at Asian trading hours on Thursday.
However, Viktor Shvets, head of Asian strategy for Macquarie Commodities and Global Markets, brushes off these concerns.
"My view has always been that the yield curve tracks absolutely nothing," he told CNBC's "Squawk Box" on Thursday.
"What it tells you (s) is that you will have a recession if you do nothing about it," Shvets added.
The investment in the yield curve, he said, may indicate that the global economy is slowing down. This is due to a lack of liquidity, the absence of reflection and a de-globalization of trade and capital flows, according to Shvets.
"If you reverse these elements, the yield curve will respond very quickly," said the strategist, adding that "for recession, political error is equivalent."
The central banks have never run out of bullets.
worried that central banks might not have enough fuel in their minds to make the policy count, Shvets said the show was "nonsense."
"It has to be made clear: central banks have never run out of bullets, ever," he said. "There are so many tools that central banks can bring, (other than) just looking at interest rates."
Asked if he was concerned that markets and the economy would become numb and weaken the impact of central bank actions, Shvets had questions of his own.
"Would you rather have a deep recession? Would you rather have closures of factories? Would you rather have banks going down and people losing their deposits?" he asked. "If the answer you give me is & # 39; no & # 39 ;, there is no choice but to take different forms of medication."
He further took the analogy, saying: "One of the things we have suggested is that there are drugs that have lower side effects than monetary policy. And I think we need to put off the other drugs, not because they solve the problem, but because they extends life. "
While fiscal responsibility and structural reforms are good In theory, they almost never work in practice because" people get rid of them "to embrace them, Shvets added.
"What people want to see is a perpetual growth machine. That's what we've gotten used to over the last 30, 40 years," he said. "Breaking away from it is almost impossible without real intestinal wrench adjustment."
Given the choice between resetting the system and finding new ways to expand growth, he said most would choose the less painful alternative.
"It just can't go on forever," he said. "But we can extend it by a decade or longer."