Recession Model Update (September 2019)
All,
The end of this Fed-fueled week (rate cuts and repos) seems like a good time to review the latest model predictions, as of September 7.
Model Outputs, with Guggenheim comparison
As luck would have it, this week Guggenheim updated predictions for their recession model. Recall that the Guggenheim model was the original inspiration for this project.
The main takeaway here is that our models agree over the [0 to 24] month time frame, but my model sees a higher risk in the [0 to 6] and [12 to 24] month time frames while Guggenheim sees more risk in the [6 to 12] month time frame:
Guggenheim's thorough report is here.
Model Predictions for October
I expect the probability outputs to hold at current levels (or dip slightly) when I run the model around October 7, since none of the input variables have changed significantly since September 7. Additionally, market turbulence (chart, blog) remains muted.
Repos!
I won't add to the oceans of ink being spilled on this topic, except to note that repo market "panic" hasn't yet spread meaningfully to other markets. For a one-of-a-kind perspective on repo market gyrations, see this article.
Until Next Time
Terrence | terrencez.com
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