Street Signals
Last Year's Surprises Meet This Year's Markets
Feb 1, 2024
The podcast discusses potential surprises in the market for 2024. Topics include the probability of a US recession, drivers of a recession, the reliability of yield curves as indicators, easing policy to prevent tightening, valuation of the yen, and institutional response to market conditions.
19:41
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Quick takeaways
- The probability of a recession in the US in the coming 12 months is around 90%, primarily driven by factors such as the negative yield curve and declining payrolls.
- The market sentiment towards the Federal Reserve's policy has shifted to a dovish tone, leading to a reduction in rate hike expectations and an alignment between the market and the Fed, although there may be some disagreements on timing and extent of rate cuts.
Deep dives
US recession probability
Despite data showing the US is not in a recession, indicators suggest that the probability of a recession in the coming 12 months is still around 90%. Factors driving this probability include the negative yield curve and slowing growth in payrolls and industrial production. Among these factors, the most likely driver of an eventual recession is the decline in payrolls, which could impact consumer spending.
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