A couple of nice chart series from The Market Ear today. US recession has been priced out.
| Recession is out |
| People are forgetting about the recession, or is the recession not happening? |
 Google | |
| Recession talk not spiking |
| The proportion of firms mentioning “recession” in quarterly earnings calls came to a halt, way below COVID crash highs. |
 Haver | |
| Recession probabilities crashed |
| Recession probabilities crashing as priced in by the probably most important assets: equities and high yield. Probability of a recession as currently priced in across US equity, credit and rate markets today (chart 1) vs June 16th (chart 2). |
 JPM |
 JPM | |
| Recession postponed |
| Professional forecasters still see a below average probability of contraction next quarter. |
 Haver | |
| Recession: never ever have I… |
| With data going back to 1947, we’ve never seen a 2-quarter decline in real GDP of this magnitude (-0.63%) without the US being in a recession. |
 Compound | |
| A 5th time? Nope… |
| There are 4 times where Fed tightening didn’t end in recession and a pivot started a new bull market – ‘66 ‘85 ‘95 ‘19. Michael Kantro explains why it won’t happen a 5th time: “In those cases, food/energy inflation didn’t go >5% and housing V-bottomed as soon as the Fed stopped. That’s not the backdrop today” |
 Kantro | |
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| Everybody bullish? |
| Citi notes that their index of global sell side stock calls is back to peak bullishness, basically triggering a “red flag” in their indicator. Analysts see few signs of a global recession coming according to Citi. Talk about very “fast market” economy……and also now closer to a complacency point where one actually could start shorting the market again. | |
Which means it must be time to be turning bearish!
| What if the bear makes a come back? |
| Over the past few days we have presented a series about the bounce in five different thematic emails (premium subs only), Where are we in this squeeze…are we “there yet”?. Trading violent bounces like the one we have witnessed is hard and many get caught wrong, both ways. We expected an overshoot above the 4200 level and a “real” volatility puke. We never saw this play out, but trading is not perfect. Maybe we are not there yet, but we are definitely much closer. Time to put on the first bear trade. | |
| Sentiment in a bear market: what do you expect? |
| Yes, sentiment & positioning data continues to look depressed and has kept us from going short over the past few weeks. However, if this truly still is a bear market one should not expect these indicators to swing from full risk-off to full risk-on. It is worth noting that some indicators actually are somewhat (and even markedly in some cases) off their extremes. This one below is at least 10%-points off the 1-month reading and even better than the 3-month reading. This actually means something. Do NOT expect to get the perfect sell signal from sentiment & positioning charts. You need to go early. |
 Goldman | |
| Everybody bullish? |
| Citi notes that their index of global sell side stock calls is back to peak bullishness, basically triggering a “red flag” in their indicator. Analysts see few signs of a global recession coming according to Citi. Talk about very “fast market” economy……and also now closer to a complacency point where one actually could start shorting the market again. | |
| Did you get sucked in? |
| Nomura’s McElligott with a few bullets worth revisiting: 1. CTA de-grossing of winning 1H22 cross-asset “Trend trades” is now largely complete…these strategies have been forced into chasing stuff as we ripped higher. Given the poor liquidity environment things moved quicker than most thought was possible | |
