U.S. equities extended their last week’s sell-off on Monday, while 10-year Treasury yields dropped to 3.8% amid a resurgence in recession fears as financial markets were unsettled by additional signs of labor market weakness.
Alpine Macro’s optimism is grounded in a few critical arguments. First, they highlight the unique nature of the COVID-19 recession, which differed significantly from past economic downturns. The recession was driven by government lockdowns rather than the natural progression of a boom-bust cycle. Alpine also notes that the bears often cite the"burnt-out" savings from pandemic-era income transfers as a reason for imminent recession, suggesting that consumer spending will collapse as these savings deplete. However, strategists dismiss this view, explaining that the personal savings rate has normalized and consumer spending remains robust.
"To say that U.S. consumers as a whole are seriously stressed is factually incorrect,” Alpine argued. Looking ahead, Alpine Macro sees potential for a strong bull market in equities, driven by continued innovations and productivity gains, particularly in the AI sector. “Small caps, financials and eventually industrials will do well in 2025, while the Mag 7 could be inflated even more and move into bubble territory,” they added.