A key recession indicator favored by the Federal Reserve has shown a significant decline this week, similar to the situation in 2008. This indicates that bond investors are anticipating a sharp economic downturn due to the extensive tariffs imposed by U.S. President Donald Trump. Economists and investors commonly use various metrics to forecast a potential recession. One frequently observed metric is the difference between the yields on two-year and 10-year Treasury bonds. However, Fed Chair Jerome Powell reportedly focuses on the difference between the yield on three-month Treasury bills and their expected yield in 18 months as a more accurate reflection of short-term rate expectations. This indicator suggests a nearing recession when the spread becomes negative. The ongoing rate hikes since March 2022 have maintained this spread in negative territory, with the most recent reading at minus 113 basis points, the lowest since October. The imminent threat of a recession is evidenced by this indicator and the substantial adjustments in rate projections by financial institutions. The escalation of global recession risks is attributed to Trump's tariffs, prompting expectations of further rate cuts. Consequently, there is a significant shift in market sentiment towards anticipating deeper cuts in interest rates, which has adversely affected banking stocks. The outlook for other central banks also mirrors this cautious approach, with expectations for multiple rate reductions. It was anticipated that Trump's tariff strategies would be temporary negotiation tactics; however, the situation has proven to be different than expected, prompting increased uncertainty among investors.