This paper examines what factors move US and European stock and bond markets, extending earlier work by Campbell and Ammer (1993). Inflation news is incorporated into the stock and bond decomposition and explicit attention is given to different horizons over which expectations are formed....

It is commonly agreed that the term spread and stock returns are useful in predicting recessions. We extend these empirical findings by examining interest rate and stock market volatility as additional recession indicators. Both risk-return analysis and the theory of investment under uncertainty...