LIVE MARKETS-Did someone say "recession"?

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DID SOMEONE SAY "RECESSION"?

On April 2, U.S. President Donald Trump threw his "Liberation Day" party at the White House lawn and world markets took a steep dive, prompting bets that the global economy was headed for a recession.

Here we are, nearly six weeks later, with a note from Deutsche Bank Research that asks: "where is this recession?"

Citing U.S. April payrolls, expansionary Euro area PMI readings, a recovery in the number of container ships bound from China to the United States, macro strategist Henry Allen writes there are "few obvious signs" of a global economic downturn.

What's more, markets have "basically unwound the entirety of their losses since April 2, with the German DAX hitting a record high on Friday," Allen says.

Looking forward, "there are still lots of factors pointing away from a recession, and this morning's news of lower U.S.-China tariffs adds to that evidence," the note says.

But beyond economic resiliency, policymakers have a weak stomach for market turmoil.

"If people started losing their jobs and a recession occurred, that would quickly make incumbents more unpopular," Allen writes. "So the market, economic and political incentives all point away from a recession."

That, indeed, appears to be how the game is being played thus far.

As the S&P 500 approached bear market confirmation and the 30-year Treasury Yield inched above 5%, a 90-day tariff delay magically appeared, which helped the market begin to bounce back.

It's a sign that policy-driven market volatility is easily "dialed back" with trade agreements returning some certainty to markets again, according to the note.

(Stephen Culp)

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