United States

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.

We give our thoughts on this morning’s CPI release and (lack of) market reaction. We also close our short position in January 2025 fed funds futures.

The month of October ahead of a US general election tends to be a volatile month with negative outcome for equities. As such, it is prudent to remain on the sidelines until after the election.

The US election underscores three long-term trends of Generational Change, Peak Polarization, and Limited Big Government. Investors should expect more volatility around the election and should assess the results before adding more risk. While we predicted the October surprise from the Middle East, more surprises are coming before the final vote is cast.