US capex

With the correlation between bonds and stocks returning to negative (a good thing, from a diversification point of view!) the market is signalling that worries have shifted somewhat from inflation to growth, specifically, whether we might be on the cusp of a recession.

That is not at all visible in the data. “Core” capex, shown below (goods that last more than three years) continues to rise and is strong on all frames.

The housing slowdown is real, and it is a major indicator for us, however it is meant to slow, it is the key part of the economy that the Fed is worried about overheating.

So, complex, sure, nuanced, sure, but for a broader “recession” framing, you need to see investment rolling over, in turn reflecting a lack of confidence from consumers and businesses alike.

And near term, this just doesn’t seem likely.

Stock-markets have priced 15 of the last 7 recessions, meaning that the market, fearing a recession, sell-off, and when the bad thing doesn’t happen, or the data continues to prove sufficiently robust, the market recovers.

That may or may not eventuate here, from the Fed’s tightening, but it would be too soon to call from this data.

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