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Mar 27 8 tweets 5 min read Twitter logo Read on Twitter
Does @MichaelKantro's #HOPE framework indicate that we're in a recession?

Short answer: YES.

And we believe the model points to NEW LOWS in the S&P 500 before the end of this cycle.
Our prior analyses of the #HOPE framework showed that it was a powerful indicative model of leading, coincident, and lagging recessionary indicators.

2007-09 analysis:
1973-75 analysis:
So what about now?

Every downturn has its sequencing "flavor" but the leading recessionary markers are clear:

✅ A huge drop in consumer confidence.

✅ Sharp fall in housing permits.

✅ Rapid rise in Fed Funds Rate.
We believe the recent spike in housing permits is a temporary uptick in an otherwise strong downtrend that is yet to bottom.

Worth noting that June 2008 saw a strong spike too deep in the heart of the recession.
Unusually, the Fed Funds Rate looks like a coincident, rather than leading, indicator.

However, our view is that this is a function of just how late the Fed was to raise rates as a result of the "transitory" inflation narrative debacle of 2021.
But what about GDP you might ask?

YoY Real GDP is currently 0.9% and in a strong downtrend.

Here are the YoY Real GDP prints at the start of the last 7 recessions:

2008: 1.5%
2001: 1.0%
1990: 1.7%
1981: 4.3%
1980: 1.4%
1973: 4.0%
1969: 2.0%
So what does this mean for markets?

In our view it means considerable downside risk.

It's our firm expectation that the S&P 500 has YET TO BOTTOM in this cycle.

Stay safe out there and manage your risk folks.

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