Doom & Gloom
On Tuesday, models released by both Goldman Sachs (GS) $Goldman Sachs (GS.US)$ and JP Morgan (JPM) $JPMorgan (JPM.US)$ showed that the markets-implied likelihood of a US economic contraction or recession had increased quite materially. Goldman's model has apparently increased the probability for a recession from 29% to 41%, while JP Morgan's model now shows a 31% chance for such a contraction, up from 20%.
As reported by Bloomberg News, rate markets are pricing in much higher probabilities for recession. According to Goldman's models, the 12-month forward implied change in the fed Funds Rate alone is itself implying a 92% probability for recession. According to JP Morgan's models, the move in the yield for the US Five Year Note implies a 58% chance for an economic reversal.
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NYSE floor trader for over 30 years. Day trader, long-term investor, and anything in between.
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