As markets enter 2023 with a bullish moment, a new analysis from Wall Street broker JP Morgan shows a bullish outlook for the year, with a soft landing being the most likely outcome. I conclude that it is possible.
What happened: According to Bloomberg, JPMorgan’s trading models currently show seven of nine asset classes, ranging from high-grade bonds to European stocks, have less than a 50% chance of a recession.
This marks a significant improvement from October 2022, when the company said the recession was all but over.
That said, global money managers said the economy was not out of the woods yet, with the S&P 500 index still estimating a 73% chance of a recession, he added. On a positive note, the recession probability priced in by the stock market has improved from his 98% in 2022.
Asset classes that currently discount the likelihood of a recession by less than 50% are:
- US high-grade credit
- US high yield bonds
- 5 year government bond
- european stock market indices
- European Union high-grade credit
- European Union High Yield Bonds
- European Union 5-year government bonds
Excluding the S&P 500, only base metals reflect recession probabilities greater than 50%.
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“Most asset classes have steadily priced in the risk of a recession, boosted by the resumption of economic activity in China, the collapse in gasoline prices in Europe and a larger-than-expected downward shift in inflation in the United States,” said JPMorgan strategists. I am there,” he said. Nikolaos Panigirtzoglou reportedly said.
Opinion divided: Marco Kolanovic of JP Morgan, Investors are underestimating the potential pressure on stocks from slowing growth in the coming months, according to Bloomberg.
The chance of a recession rose to 65% from 50% in October, according to economists’ consensus forecast, the report added. He also pointed out that the yield inversion on US Treasury bonds continues to sound recession warnings, with the yield on the 3-month note still above his 10-year yield.
The recent market rally reflects investor expectations that the central bank can bring about a soft landing, the report added.
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