Not yet

And just like that, the recession odds in the U.S. have gone down from 65% to 40%. What has changed? The fact that US and China are having trade discussions and that they have decided to lower their respective tariffs significantly. The odds are still high enough to be concerned, but 50% less than on liberation day. And that means we have a very nervous and anxious market. And that translates into market volatility. Equity indices exploded yesterday on the news. The bond market, the real market thermometer, slowly but surely keeps building and upward sloping yield curve after being inverted for a while. Next stop? The meeting in June, which will create a news airpocket that needs to be filled with something. Since the FOMC meeting for June is on 17-18th, trade negotiations will like be after the FOMC to allow the Fed to remain independent of the negotiations. No rate cuts are expected for May, June and July. September is already discounting a timid cut, but that can change depending on the 2Q GDP number. In the meantime, President Trump and Congress are discussing the draft of “the” Tax plan, which is meant to be a comprehensive rehaul of the U.S. finances, but it’s not clear if it will tackle the most important line item: the deficit.

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