Recession probability slightly weakened, according to markets

As global markets grappled with high inflation, high interest rates and recession fears, JPMorgan’s modeling showed that market expectations of a US recession fell sharply.

While analysis by many experts from Wall Street to Davos has been overshadowed by recession concerns, US investment bank JPMorgan has reported that the odds of an economic downturn listed in financial markets have fallen sharply since its peak of 2022.

DECREASE FROM ABOVE

According to the bank’s model, 7 of 9 asset classes, from high-quality bonds to European stocks, have less than a 50 percent chance of going into recession. This index marked a sharp decline from October, when the possibility of an economic contraction was almost certain across the market.

Although the S&P 500 currently identifies a high probability of a recession of 73 percent, this rate is well below last year’s 98 percent level. On the other hand, bank executives speaking at the Davos World Economic Forum are more optimistic as inflation cools and China reopens.

POSITIVE DEVELOPMENTS HAVE A PRICE

“Most asset classes are constantly pricing in downside risks due to the reopening of China, falling gas prices in Europe and lower-than-expected inflation numbers in the US,” he said. Nikolaos Panigirtzoglou, a strategist at JPMorgan. “The market expects a much lower probability of a recession than in October.”

“I’m not saying growth will skyrocket, all I’m saying is it’s not going to be a horror movie,” Max Kettner, a strategist at HSBC Bank, said in an interview with Bloomberg.