Recession fears

After a roller coaster two weeks in the equity markets, we’re back to where we were at the end of July. Thanks to good inflation data and a relatively poor unemployment data, the path to lower rates is getting clearer. Recession fear is now the number one tail risk, even after a relatively strong retail sales report. You can see in the chart below how inflation is on third place, and an election sweep is the last one on the list. Chances are, as we get closer to November, that conflict arising from the election will overtake the other tail risks. Volatility due to these factors (and others) is likely to be present until the end of the year. After a short hiatus where investors feared the AI hype was done, money has returned to the usual suspects on the space with renewed narratives. Indices will try next week to regain all time highs on the back of those recession fears.

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