Over the past few weeks, a number of Wall Street titans have been warning a recession could be imminent and they’re pointing to some of the biggest flashing warning signs they’re used to in financial data, but not everyone has such a bleak view of U.S. economic prospects.

There’s serious debate as to the future of the U.S economy, and experts on both sides of the argument have strong evidence to back up their claims.

Billionaires like Carl Icahn, Bill Gross, and Jeff Gundlach argue stagflation, a recession, or “even worse” could be in the cards as the Federal Reserve attempts to cool inflation with interest rate hikes. But some top economists and investment bank leaders don’t buy it.

Lisa Shalett, the chief investment officer of Morgan Stanley’s Wealth Management division, said she is “far from calling a U.S. recession” in a report published last week. She cited US households’ $2 trillion in excess savings and the possibility for energy independence as key factors in her bullishness.

Nikolaj Schmidt, T. Rowe Price’s chief international economist, is also less than convinced that a recession is coming. Schmidt argued pent-up demand and the slow restoration of global supply chains will help to buoy the economy as pandemic restrictions ease in a report on March 9.

Still, there’s no doubt that the U.S economy has seen growth expectations take a hit in recent weeks and some recession signals are flashing red. Here are the major sources of concern.

Recession signals flashing red

First, there’s the bond market’s favorite recession signal—the yield curve. That’s Street talk for the difference (or “spread”) between yields on short-term and long-term government bonds. An inverted yield curve, where short-term bonds yield more than long-term bonds, has predicted every recession since 1955, with only one false signal during that time.

On Wednesday, the spread between two and 10-year yields on U.S. government bonds fell to just 0.2%. That’s a blinking-red warning sign.

Even the one time the yield curve was wrong isn’t encouraging: That was in the mid-1960s, when it didn’t coincide with a recession but instead with the “Great Inflation,” which lasted all the way into the early 1980s and has been frequently compared to the soaring inflation of 2021 and 2022.

George Ball, a chairman at the financial services firm Sanders Morris Harris, told Yahoo Finance, “the flattening of the yield curve is scaring the bejesus out of most investors and traders.”

Consumer sentiment is another common recession signal used by Wall Street, and that’s been lousy dating back to mid-2021.

In February, the famous University of Michigan survey of consumers fell a stunning 19.7% year-over-year to its worst level in a decade. Largely attributed to weakening personal financial prospects caused by rising inflation, this drop in sentiment prompted a series of economic analyses on why Americans so intensely hated an economy that otherwise seemed to be booming.

Small businesses are also lacking in confidence. The National Federation of Independent Business (NFIB) Optimism Index decreased by 1.4 points to 95.7 in February in its second month below the 48-year average of 98.

Recession signals that remain in the green

Not all recession signs are indicating economic pain is on its way, however. 

Industrial production is a key indicator of economic strength used by economists to determine if a recession is incoming. And in February, total industrial production in the U.S. rose 0.5% to a level that is 103.6% above the 2017 average and 7.5% above what it was at this time last year, Federal Reserve data shows.

The US purchasing managers’ index (PMI), which tracks sentiment among buyers who work for manufacturing and construction firms, also remains strong. The figure came in at 57.3 last month, that’s more than 6% higher than the U.S. average over the last decade.

The U.S. economic policy uncertainty index, which measures policy-related worries, also fell to 139 in February, down from over 200 in December 2021, indicating fears surrounding a policy mishap from the Federal Reserve or Biden administration are fading.

Great inflation 2.0?

Despite reduced policy uncertainty, there’s a wealth of economic data that doesn’t exactly inspire confidence in the U.S economy, and worries economists about a resurgence of economic woes unseen since the 1970s: a Great Inflation redux or a new version of “stagflation.” 

First, growth is moderating and gross domestic product (GDP) expectations are falling. Fitch Ratings cut its US GDP forecast by 0.2% on Monday and now sees national GDP growth of just 3.5% this year. The Chicago Fed’s National Activity Index (CFNAI), which serves as a monthly gauge of overall economic activity, also fell 13% month-over-month in February, pointing to a slight decrease in economic growth.

Inflation is another major concern among many economists and Wall Street analysts. The U.S. inflation rate hit a four-decade high in February, spurring the Federal Reserve to raise interest rates and pledge further rate increases throughout the year as it attempts to fight rising consumer prices.

February’s inflation figures don’t even include the recent oil supply crunch brought about by Russia’s invasion of Ukraine. Oil prices moved as high as $139.13 per barrel in early March after the U.S. banned oil imports from Russia.

Although prices retreated to below $100 per barrel briefly after the initial jump, they’re now surging again. Brent crude oil, the international benchmark, rose roughly 5% on Wednesday to over $121 per barrel. High inflation and an international oil crunch summon back memories of the “me decade” for those old enough to remember living through bell bottoms and disco.

However, despite oil prices’ recent jump, Morgan Stanley’s cross-asset strategist Andrew Sheets said that the per-barrel oil price, when adjusted for inflation, remains well below levels seen in the 1970s and 1980s in a recent report.