There is a major historical inconsistency in the current economic environment: monetary contractions typically bring the economy down first and then reduce the price level, but the US is now experiencing reduction in inflation without commensurate weakness in GDP, while this pattern does not hold in major economies outside the US, which historically has not been the case, indicating elevated risk of underperformance and deflationary pressures.

The pain from lag effects is already pronounced in the manufacturing sector excluding automotive, with material decline since last September, and there has been material impact on gross domestic income, but GDP continues to rise indicating we are in the early innings of the cycle, not the middle innings.

Average credit card loan rates are now over 20 percent, the highest they have ever been historically, and at a 20 percent interest rate over a prolonged period of seven or eight years, a borrower will pay more in interest than the amount they initially borrowed.

The stock market is not a reliable leading indicator of recession and provided little warning before the Great Depression (which started in September 1929) until October 1929 when it crashed, and has not been a leading indicator historically, particularly in the last 20-30 years.

An inverted yield curve reinforces the decline in money supply, bank credit, and the consequences of high real policy rates because both banks and non-bank shadow banks profit by borrowing short and lending long, which they cannot do when the yield curve is inverted, eliminating a key source of credit creation.

The 12-month, 24-month, and 36-month rate of growth in bank credit (loans and investments) are all negative, which is very unusual and historically only occurs during or after recessions, but in this cycle the contraction in bank credit shows the markings of an old-fashioned credit crunch even before the economy is officially in recession.

We are very late in the game in terms of lag effects from policy decisions, specifically seven quarters since the maximum point of financial looseness, and the longest lags are nine quarters, so lag effects could still persist for another six months or so.

The economy has not yet dodged the bullet from monetary tightening; while there can be fortuitous circumstances like favorable weather or energy market corrections, recent commodity price increases will disrupt household budgets at a time when household budgets are already in disarray.

Current initial conditions are not favorable either domestically or internationally, which supports the case for substantial yield declines given the extreme yield curve inversion.

The yield curve is extremely inverted with short rates well above long rates, and in the last 4-6 weeks spreads between 2-year and 10-year treasuries were more positive (less inverted) than at any time since the 1980s, though the overall curve remains in extreme inversion.

In the Maturation and Ease Off phases of the business cycle, the statistics look almost identical, with lagging indicators remaining the strongest component and leading indicators deteriorating while coincident indicators are mixed, making it difficult for observers to know in real-time whether the economy is slowing.

Markets often rally strongly in the false dawn before recessions and major downturns because people believe inflation and monetary tightening impacts have already been absorbed, but ultimately the effects do congeal and recessions arrive; we are currently on the cusp of moving toward the Plunge phase.

As a bond fund manager, Hunt believes long-term treasury yields will trend downward, and he believes a long duration portfolio is warranted, despite the mixed nature of the economy, because critical forward-looking elements indicate falling yields ahead.

America's negative net savings is a perilous economic state indicating the economy collectively is living beyond its means and represents a constraint on the production function