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Something for your Espresso: Second-guessing the next (growth) narrative

It’s make or break time for the US economy as the “recessionistas” are back in the driver's seat ahead of the ISM Services release. Rates markets will be monster sensitive to the release later today.
2024-06-05

Morning from Europe.

The tensions are rising ahead of the release of the ISM Service report later today. The outcome space is admittedly skewed to the downside as the market will likely be sensitive to another bearish surprise from the US economy.

The seasonality patterns in the US Surprise index have been extremely stubborn in recent years with the first half of the year being much better than the second half of the year, among other things due to the mechanical COLA-adjustments of tax brackets and social transfers. On top of that, we have seen issues with seasonal adjustments, which in general has been seen as a tailwind for H1 versus H2 (and also to a certain extent for early Q3).

We are hence reluctant to lean into the bearish narrative for now, but have implemented a few strong risk/reward trades in commodity space to recalibrate the portfolio for potential weakness.

Chart 1: Will July be another solid surprise month as in 2023 and 2022?


It’s make or break time for the US economy as the “recessionistas” are back in the driver’s seat ahead of the ISM Services release. Rates markets will be monster sensitive to the release later today.

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