Bring it in

This week is loaded with macro data, not only in the US but also in Europe, Japan and China. In the U.S., we will know the PCE, the Fed’s favorite inflation indicator, the first take on GDP YoY growth for the first quarter, and the unemployment on Friday, to mention a few data points. In the chart below, you can see the leading indicators divided by lagging indicators for the US economy, and you can see that they’re clearly pointing towards a recession. In fact the reading is the lowest since the 80’s. If the data confirms the exceptionalism we’ve been enjoying, is morphing into determinism, the Fed will be forced to act. The inflation part of the problem may overcome the pressure from tariffs since the shelter component, the biggest one, seems to be turning down nationally. The unemployment part of the problem is the one where we may get surprises, as the government employees are under pressure and corporations might start reducing headcount if a recession is imminent. As trade negotiations are underway (even at St Peter’s Basilica), the U.S. economy and equity markets will need additional support to cope with the gaps the trade rebalancing is creating.

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