BNP Paribas saying its way too early to dismiss recession fears (Deutsche Bank says the same, more to come from them below).
- “Soft landing” has been the catchphrase of a still-young 2023.
- But we think it will go out the window in the same fashion as “transitory inflation” did in 2022.
- As growth slows more noticeably in the months ahead, the markets look vulnerable.”
Deutsche Bank weighed in along the same lines (bolding is mine):
- The big question for 2023 is whether the momentum in Europe and China and the recent loosening of global financial conditions can help offset some very worrying recent US data. It’s possible that the global economy is normalising from the shock of the Ukraine war and China’s zero covid policy and that this will help the US in the near term.
- However, remember that the Fed and ECB only started hiking 10 and 6 months ago respectively with the Fed having hiked 350bps since mid-June (200bps in the last 4 and a half for both the Fed and the ECB). ... the earliest a US recession has ever started after a Fed hiking cycle starts is 11 months. So, with the usual lag of monetary policy and with how much rates have been hiked in the last 4 months alone, it will still be many months before we can get a feel for the lagged impact of policy.
- In essence, it’s not inconsistent to see better data now but expect stronger headwinds later in the year.
I posted along bearish lines yesterday also:
I need to find something to balance it out. I am open to suggestions ;-)