Below is a question one of our subscribers asked our Senior Macro analyst Darius Dale during “The Macro Show” this morning. His response follows.

Our Model Is Not Signalling Recession - z555

Every other guru is calling for a recession. What’s the main thing that differs from your no recession call? Is it the reflation trade currently expected in Quad 3 of Q4?

“I don’t consider myself a guru. Neither does Keith. We’re just two people bean-counting data every morning with rigor and passion. I think the word guru is a word we should all get out of our heads with respect to macroeconomic analysis.

Just going through the question, on slide 14, you’ll see the answer to the question is very simple. Our model does not signal a recession.

Our Model Is Not Signalling Recession - hedgeye Slide14

You have two thirds of the U.S. economy showing rock solid growth.

Meanwhile you have a manufacturing downturn. If you recall, the manufacturing downturn we went through in 2016 was a lot sharper and more protracted. And we didn’t get a recession there, just slow growth. So that’s effectively what our models are currently anticipating.

Now if a recession starts to get nowcasted into our view, then obviously our plans will change. We just can’t get to recessionary numbers right now.