BMO economist Sal Guatieri highlighted the Federal Reserve’s preferred recession indicator where the news is not great,
“It’s not just oil prices that are under the weather these days. According to the Fed’s recession equation, which is based on the spread between the 3-month Treasury forward rate 18-months ahead and the current rate, investors are placing 99% odds on a recession occurring in the year ahead. That’s even higher than before the Great Recession. No wonder the Fed’s staff now expects a downturn later this year.
“MS Research Analyst Hamza Fodderwala highlights that despite pockets of weakness, his conversations at the RSA conference suggest a healthy security spending environment. Bottom line, he came away more constructive on the security demand environment versus the market with security stocks down -10% over the last week and many retesting the lows from earlier this year.
“The closest analogues to today remain the Volcker 79-81 hiking cycle and its aftermath, which was not bullish equities. We also draw from the end of 2018 hiking cycle and the debt ceiling crisis of 2011. Bonds are strongly favored over equities which agrees with our hiking cycle theme and debt ceiling analysis.