JPMorgan model shows that the probability of a recession fall sharply

Last week fears of a recession began to rise in the markets. However, JPMorgan Chase & Co. data shows that the probability of an economic downturn has become lower. Recession indicators priced in the financial markets have fallen sharply compared to their peaks last year.

The bank’s trading model demonstrates that seven out of nine included asset classes indicate the odds of the recession below 50%. These results are essentially different from the ones of October 2022. At that time, the recession threatened all the markets.

At the same time, the S&P 500 index still assesses the probability of a downturn rather high, at the level of 73%. Although this level is lower than last year’s 98%, it does not bring optimism to global money managers. On the other side, the index is in line with raising rates towards a soft landing that might help to avoid the recession.

The Treasury yield curve as a kind of recession indicator for the bond market gives warning signals. Thus, three-month bond yields are currently higher than ten-year bond yields. Consequently, investors bet on a slowdown in economic growth.