Valuations

Rising stock prices and improving economic data have us re-examining our bearish thesis, but we still see deterioration in leading labor market indicators and expect it will eventually culminate in a recession. We reiterate our defensive investment recommendations.

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.

It is too early to say that the US labor market has turned the corner. We assign a 60% chance that the US will enter a recession over the next 12 months, with the downturn likely to begin in the first half of 2025. Accordingly, investors should underweight equities.