Recession Model Update (February 2021)

Friends,

Model values continue dropping across all time frames, suggesting that the recovery is charging ahead.

Current Values (as of February 8, 2021)

Flashback: Last February

Remember how everything seemed last February? From my February 2020 update, published on February 10, 2020:

• “Model recession probabilities held steady last month. The overall mood of the markets is pretty upbeat, and a recession *feels* nowhere in sight to market observers.”

• Meanwhile, the "novel coronavirus" has replaced Iran on the worry list. It may take awhile for the full effects of the outbreak to show up in economic data points, so it doesn't seem like there are many immediate catalysts for recession.

Coronavirus was still largely seen as a regional issue confined to the APAC region, if I recall correctly. It wouldn’t be until Monday, February 24th that the stock market began crashing due to coronavirus.

But remember, by this time last year, the yield curve had already inverted in certain segments, recession model probabilities were still at elevated levels, and the consensus view among economists was for a recession sometime in 2020-2021. In the end, this view became correct, but not for the reasons most people expected.

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Until Next Time

Terrence | terrencez.com

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