Recession-Hard/Soft Landing

This morning’s employment report showed solid job growth, but recent consumer spending indicators are more concerning. The risk of recession starting within the next few months has increased. We suggest some important indicators for investors to track in the current environment.

The US economy is set to enter a recession within the next few months. Stay underweight equities and overweight cash. Look to increase fixed-income duration exposure over the coming months. The euro is likely to strengthen and European stocks should outperform US stocks over the next month or so, but these trends will reverse by the middle of this year.

Our Portfolio Allocation Summary for March 2025.

Our Portfolio Allocation Summary for January 2025.

While the US economy could remain upright on the tightrope for a while longer, it will inevitably fall, leading to a major bear market in stocks. We will be looking to our MacroQuant model for guidance on when to turn fully defensive. We are not there yet.

We examine Treasury market valuation and look for indicators that could help us time the next peak in yields. We also update the forecasts from our Treasury yield model.