- We asked dozens of Wall Street’s top minds about the most important trends in markets right now and why they matter.
- The charts below provide insights into many of the biggest stories in financial markets, and shine light on where investors should be putting their money now.
The roster of experts below provided Business Insider exclusive insights and actionable data on the biggest trends in markets, and why they matter to investors.
Amid a slowdown in parts of the US economy, many experts are worried about the next recession, and several identified the indicators they’re watching most closely to confirm its inevitable arrival.
On the bullish side, a plurality of the chief equity strategists singled out trends that point to a continued rebound in the stock market following the correction late last year.
All of the text accompanying each chart is directly attributable to the author.
Gary Shilling: There’s a “two-thirds probability” of a recession this year.
“The Fed’s earlier belief in the Phillips Curve has been challenged by reality. Despite the plunge in the headline unemployment rate from 10% to 3.9% in December, inflation remains below the central bank’s 2% target. Globalization, declining unionization, robots, Amazon, Uber, government pressure on drug costs, the competitive race to zero in financial fees, the strong dollar and consumer and business resistance to price hikes are all at work.
The likelihood of a recession starting this year, which I rate at two-thirds probability, is also deflationary. That would end and reverse the Fed credit tightening campaign that started in December 2015.”
Marko Kolanovic: Stock-market liquidity and volatility have an increasingly dangerous relationship.
“There’s a strong and non-linear relationship between S&P 500 futures market depth (a measure of liquidity) and volatility – market depth declines exponentially as the VIX rises, and this relationship has been getting stronger in recent years. An increase in volatility also typically results in selling by systematic investors, as many of these strategies effectively embed a ‘stop-loss.’
Given this systematic selling happens in an environment of reduced liquidity, it causes their flows to have an outsized price impact. This liquidity-volatility-flows feedback loop creates market fragility and increases the risk of tail events.”
Written with Bram Kaplan, senior analyst on the Global Quantitative and Derivatives Strategy team.
David Rosenberg: “We have as much as an 80% chance of a recession.”
“Global liquidity conditions have tightened dramatically on the back of either tighter or less accommodative central bank policies. This will hit the world economy with a lag, and history suggests we have as much as an 80% chance of a recession as a result of this tourniquet.”