Morning from Copenhagen.

US fixed income continues to be bid as the risk-off sentiment persists in equities, and the big question everyone is asking is how far this can go now that the Nasdaq is down more than 12% from its peak?

Despite significant growth weakening throughout February due to 1) policy/tariff volatility forcing firms to be cautious and 2) frontloaded inventories pumping up activity in December and January, the growth slump has halted in our US nowcast, and we are actually starting to see a slight uptick in growth.

The current recession chatter among analysts seems a bit stretched, in our opinion, as there is still nothing outside of sentiment that points to an outright recession. If a technical recession does occur, it will likely be driven by imports and government spending.

Additionally, we are now seeing banks downgrading the US while upgrading China and Europe, which should serve as one of the ultimate buy signals to accumulate US risk—especially as we approach tomorrow’s CPI report, which will likely be less soft than anticipated.

Many are only focusing on the tariff effect while ignoring broader price trends in the inflation basket, particularly the large inventories now in place for US manufacturers, which will force manufacturers to keep prices stable to avoid being stuck with unsold inventory.

Chart 1: The growth slump has stopped for now