Morgan Stanley Fixed-Global Macro Strategist Did Sahm-one Say Recession-109894318

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侵权投诉



Global Macro Strategist

Did 'Sahm'-one Say Recession?



Matthew Hornbach



 !"  #$%$%&'$($)*&

Andrew M Watrous



+,-. !"  #$%$%&'$(/%)&

Martin W Tobias, CFA



0 !"  #$%$%&'$('1&'

Francesco Grechi



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Zoe K Strauss



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789:#

James K Lord



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David S. Adams, CFA



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Wanting Low



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Lorenzo Testa



>0 !"  #66%1&'&&(1**&

Fabio Bassanin, CFA



2? !"  #66%1&6%/($)'4

Dominic J Krummenacher



< @.  !"  #66%1&6%/(4&)$

A23:B88CDE#

Koichi Sugisaki



@.F !" .G  #)$*')*'()6%)

Hiromu Uezato

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

Eli P Carter



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US economic data over the past two weeks calmed nerves

about a possible recession – initially brought about by a

triggering of the Sahm Rule and a partial unwind of yen carry

trades. Defensive positioning offended instead of pleased, but

we stay in UST curve steepeners into supply/Jackson Hole.



We discuss the Sahm Rule, a new recession warning indicator from Michaillat

and Saez (2024), and our economists preference for an indicator created

from the employment-to-population ratio. We combine all three in a

"Triumvirate Rule", which implies a 22% probability that a US recession began

already. This compares to the 16% probability professional forecasters

assigned to negative real GDP growth in 3Q24 and a 0% probability from the

employment-to-population indicator.



In the US, we maintain UST 2s20s steepeners and maintain Sep/Nov FOMC

OIS flatteners. In the euro area, we enter RXV4 132.5/131.5 put spread and

maintain EUR 2s5s flatteners (vs. ESTR), ECB Sep/Oct OIS steepeners,

ERZ5ERZ6 flatteners, and long ERZ4 96.625/96.875/97.125 call fly. We close

the 10y BTP/Bund widener. In the UK, we stay long SFIZ4 95.40-55-70 call

fly, and keep 10s30s gilt flattener and short 15y ASW. In Japan, we maintain

long 20y JGB vs pay 2y OIS, and JGB 5s10s ASW box flattener.

 

In light of recent events, we look at what has happened historically in G10

FX when the VIX spikes. We argue markets will price additional RBNZ cuts.

We provide an overview of different metrics that are indicative of the trend

and size of the JPY carry trade. We close short CAD/JPY position as investors

have increasingly priced in US soft landing scenario.

!"#$%&%

In the US, we compare 5-year breakevens intraday moves with monthly

surprises in CPI. We analyze historical trends in rent inflation.

 "'

We discuss factors that keep us neutral on repo conditions. We examine

MMF portfolio holdings in July and find MMFs accessing the RRP became

increasingly concentrated.

'((

We maintain our vol surface steepener amid stretched valuations and a

(potentially) quiet week ahead.

The next Global Macro Strategist will publish on September 6, 2024.

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and trading securities held by a research analyst account.

August 16, 2024 11:16 PM GMT



Global Macro Strategy

JH3+K0+KILJ Matthew Hornbach

 #$%$%&'$($)*&

Did Someone Say 'Sahm'-thing About a Recession?

What probability do we put on a US recession? We get asked this question often, but it's a

question better directed to our economists. It's also a question that requires specificity.

What is the probability we enter recession again at any point in the future? What is the

probability we will enter a recession in the next year? What is the probability the

recession has already begun?

The Philadelphia Fed surveys professional forecasters every quarter about the probability

they assign to negative real GDP growth in the quarter of the survey, the following

quarter (the “Anxious Index”), and the few quarters thereafter.

For the 3Q24 survey published August 9, professional forecasters – including our Chief

Global Economist Seth Carpenter – assigned a 21% probability, on average, to real GDP

contracting in 4Q24 (see Exhibit 1 ). They assigned a 25% probability, on average, to real

GDP contracting in 4Q25 (see Exhibit 2 ).

Exhibit 1: M!!"2,.="GMG!

2NM2OP+Q.7,Q

100

'68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20 '24

NBER recession Anxious Index

.P!"HD2H?M!,!RDK?IHD?! 

Exhibit 2: M!!"2,M2PM!"!3<M

,!6S.

100

'68 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '16 '20 '24

NBER recession +4-quarters

.P!"HD2H?M!,!RDK?IHD?! 

Forecasting involves art and science, and remains as difficult an endeavor as ever.

Forecasting recessions, given the infrequency, seems to be one of the most difficult

aspects of the profession. Data from the Survey of Professional Forecasters (SPF) make

that clear.

• In the quarter before NBER recessions, professional forecasters almost always

assigned "usual" probabilities that a recession will begin in the following quarter,

where we define "usual" as within 1 standard deviation of the non-NBER recession

average assigned probability (see Exhibit 3 ).



 !" 3

• In the quarter an NBER recession begins, professional forecasters placed higher-

than-usual probabilities that the recession will begin that quarter, but still "low"

probabilities on an absolute basis, where we define "low" as around a 1-in-3 chance

or lower (see Exhibit 4 ).

Exhibit 3: +Q.7,QS.GK?IH

,(=

20 18

3Q69 3Q73 4Q79 2Q81 2Q90 4Q00 3Q07

Anxious Index in quarter before NBER recession begins

Non-recession average

and +/- 1 stdev

.P!"HD2H?M!,!RDK?IHD?! 

Exhibit 4: M!"!3<M=

S.,(=

4Q69 4Q73 1Q80 3Q81 3Q90 1Q01 4Q07

Negative GDP growth in quarter NBER recession begins

Non-recession average

and +/- 1 stdev

.P!"HD2H?M!,!RDK?IHD?! 

Investors, recognizing the challenge forecasters face in assessing the probability of a

recession, turn to other approaches. The yield curve remains a popular indicator, but has

fallen short – so far – in the current cycle. Investors also look to the Sahm Rule, which

compares the 3-month average unemployment rate to the minimum of that 3-month

average over the past 12 months.

The Sahm Rule indicator reached its publicized recession threshold of 0.5pp in July. But

our economists think the Sahm Rule misleads more than it informs in this cycle, given the

recent increase in the labor force. Another "rule" making the rounds comes from Michaillat

and Saez (2024), which also reached – and then surpassed – its recession threshold of 0.3

(see Exhibit 5 and Exhibit 6 ).

Exhibit 5: !!,>N%1%6O

,,K?IHP$4/%R

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

'52 '58 '64 '70 '76 '82 '88 '94 '00 '06 '12 '18 '24

NBER recession Michaillat-Saez (2024)

Percentage points

Perc

.P!"HD!!,>N%1%6OD?! 

Exhibit 6: !!,>N%1%6O

,,K?IHPR%,,

0.5

0.3

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

'04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24

NBER recession Michaillat-Saez (2024)

Percentage points

.P!"HD!!,>N%1%6OD?! 

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MGlobalMacroStrategistDid'Sahm'-oneSayRecession?MatthewHornbach!"#$%$%&'$($)*&AndrewMWatrous...

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