By Leo Kolivakis via Iris.xyz.
This morning, I had a chance to speak with Chun Wang, a portfolio manager who produces great research at the Leuthold Group. Chun just wrote a Macro Monitor comment, Slowdown Or Recession? Confidence Is Key, where he outlines these main points:
- The dovish pivot of global central banks is part of the reason behind the impressive rate decline, but the recent string of sub-par economic numbers also helped to push global rates lower.
- The question is, “How low can rates go?” Over the medium term, it boils down to a call on recession.
- We present our preferred recession indicators in a dashboard and compare their patterns during a recession versus during a slowdown. A traffic-light system is used to indicate the current status (green = no recession).
- Right now, there are five green lights and six yellow lights. That means we are still in the slowdown camp, not the recession camp (yet).
Risk Aversion Index: Stayed On “Higher Risk” Signal
“While the low inflation, slow growth (but no recession), and low interest-rate environment is likely to continue and provide a favorable backdrop for credit, the market has already priced in three rate cuts for 2019, which seems aggressive and will likely limit the upside for credit going forward. We turned neutral on all credit classes.”
I will not go over the entire report, but it’s fair to say Chun’s group was positioned defensively at the end of September of last year and that helped them weather the Q4 storm.
Read the full article at Iris.xyz.