Capex

The prospect of a new trade war more than offsets the other pro-business parts of Trump’s agenda. With the labor market already weakening going into the election, we are raising our 12-month US recession probability from 65% to 75%.

The Election Day is finally upon us. No, there is no final “silver bullet” forecast contained in this email. Just our long-term forecast of how the election will, no matter who wins, impact the markets.

Germany’s economy has lagged that of the rest of Europe for nearly 10 years. So have German stocks. Investors are extrapolating these trends to bet on the country’s deindustrialization. Could Germany manage to beat dismal expectations?

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.”

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.

Western policymakers are pursuing three capital “T” Truths: China is evil, climate change is a major risk, and Russia is… also evil. Pursuing all three priorities at the same time presents a version of the classic “impossible trinity.”