They're not. Which is why stock prices fall when they discount the reduced economic activity. What this chart and Raoul's post is suggesting is that stocks have already discounted this potential recession and that it's the most anticipated recession in history -- the recession's become the consensus narrative. I suggest reading his full post here:
tk u for your reply. Markets want to be positive - and its not pricing recession : credit spreads are tighter - high yields at 400bps spread vs historically 1000bps. - but expanding. stock market valns are about avg - not below avg.
The link makes the case that markets have priced in a recession. The ISM certainly has. Nasdaq 100 was down 38% at the October low. That's pricing in an ISM in the 30s, similar to the 2008 ISM collapse. Yes, credit spreads remain tight -- I agree -- but there are other indicators that suggest a recession has been priced in (ISM relationship with market returns, stock prices, sentiment data, etc.).
All market indexes fell in 2022 by the October lows as far as they usually fall in a light recession, historically. So if the recession ends up only being a 1990 or 2001 style decline in output, then a recession could easily have already been priced in. If it is going to be a 2008 level recession, then yes -- it likely was not priced in.
last I checked - recessions are not good for stock prices.
They're not. Which is why stock prices fall when they discount the reduced economic activity. What this chart and Raoul's post is suggesting is that stocks have already discounted this potential recession and that it's the most anticipated recession in history -- the recession's become the consensus narrative. I suggest reading his full post here:
https://raoulpal.substack.com/p/non-consensus-views-the-gmi-top-5
Also, I specifically said this:
"The recession may occur, but due to the recession becoming a consensus view, there’s a non-zero probability it’s already been discounted by markets."
This is an exercise in thought about potential scenarios and their probabilities -- nothing more, nothing less.
tk u for your reply. Markets want to be positive - and its not pricing recession : credit spreads are tighter - high yields at 400bps spread vs historically 1000bps. - but expanding. stock market valns are about avg - not below avg.
maybe markets are smarter than the fed.
I will read the link tks.
The link makes the case that markets have priced in a recession. The ISM certainly has. Nasdaq 100 was down 38% at the October low. That's pricing in an ISM in the 30s, similar to the 2008 ISM collapse. Yes, credit spreads remain tight -- I agree -- but there are other indicators that suggest a recession has been priced in (ISM relationship with market returns, stock prices, sentiment data, etc.).
All market indexes fell in 2022 by the October lows as far as they usually fall in a light recession, historically. So if the recession ends up only being a 1990 or 2001 style decline in output, then a recession could easily have already been priced in. If it is going to be a 2008 level recession, then yes -- it likely was not priced in.