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Is ‘The Whole Economic Edifice’ About To ‘Fall Apart’?
There's something a bit strange about suggesting market participants are nervous.
After all, we've just seen a record-large nine-session VIX decline and, more broadly, the speediest equity vol de-escalation ever witnessed. Naturally given modern market structure, the vol crush facilitated a quick rebound in stocks which, as of mid-week, were very close to recovering record highs after erasing a "blink-and-you-missed-it" pullback.
So, "nervous" feels like a misnomer, although I'd note that "spo
Great missive as usual thanks!
Peter
I’m recalling the chart (by BofA?) published here a few days back showing the recession probability priced by different markets. It really stood out that the one market that was almost fully pricing a recession was base metals–the one thing that reflects real economic activity.
I think the base metals market is reflecting the Chinese recession, with limited relevance for a US recession.
That may well be (almost certainly is) the largest slice of the base metals demand pie, but it’s not the only slice. Moreover, China’s recession is at least in part fueled by a lack of demand growth for Chinese exports (and to flip my opening turn of phrase, that may well be the smallest slice of the Chinese recession pie, but it’s still a slice).
Unemployment headed into a recession, like so many things… Slowly at first, and then all at once.