Market is significantly under pricing US recession odds - TD Securities
|Analysts at TD Securities think financial markets are significantly underpricing odds of the US economy hitting recession over the next 12 months.
Key quotes
The current pricing for 28bp of cuts is consistent with the market penciling in about 20% odds of a recession.
Our yield curve-based recession probability models suggest 30-40% odds of a recession over the next 12 months, hinting that the market is significantly
underpricing these odds.So, the market should be pricing in about 45-60bp of rate cuts in 2020, and we remain long January 2021 Fed funds to position for this possibility.
The Federal Reserve (Fed) is expected to keep the target range for the funds rate unchanged at 1.50-1.75% on Jan. 29.
While the officials could take note of the easing of US-China trade tensions, they are likely to reiterate the case for an extended pause by citing more downside risks than upside risks.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.