Labor Market

Middle-aged households have lagged youngish and older households since the pandemic and the 40-to-54 cohort is worse off than it was at the end of 2019. The fragmenting of the seemingly monolithic US consumer widens the path to a recession and we reiterate our defensive asset allocation recommendations.

Trump may be slightly favored for the White House but the US election is still extremely close. Odds of a contested or contingent election are rising, which should cause stock market volatility. A Republican sweep should cause more volatility. Democratic gridlock is next most likely but benign for stocks in the short run.

In this report, we discuss why we are lifting our US recession probability from 60% to 65% and explain why China’s latest stimulus announcements are welcome, but probably are “too little, too late.”

Yesterday, the ECB solidified its recent dovish tilt in response to weaker growth and decreasing inflationary pressures. It is now set to cut rates 25bps each meeting. How low will the ECB deposit rate ultimately go and what does this imply for yields and the euro?

This week, we cover the main questions we fielded during our latest client trip in Europe. Among the many topics broached are Europe’s recession odds, the impact of China’s stimulus, and the outlook for European markets.