Greetings from Copenhagen! Alas, it seems like there are quite a few bears out there who have been infected with recession vibes, thus the doctor has ordered some medicine for the patients which we’ll gladly provide to the likes of Jan Hatzius et. al.. We’ll keep it short and concise. 

Firstly, the Dallas Fed’s Weekly Economic Index is at its highest since early 2022 and far far away from anything that smells like recession. Real GDP y/y should stay above 2% and the WEI is currently hinting at 3% real GDP growth.

Chart 1: Dallas’ Fed weekly economic index at its highest since early 2022

The survey data from NABE is another piece of evidence that the recession vibes need to be faded. Profit expectations which historically lead employment expectations by 2 quarters are bouncing indicating that we’ll have employment growth sometime around winter. This is not a weakening, this is an expansion!

Chart 2: Corporate profits hint at increased employment

Additionally, bank earnings are exceeding expectations widely, and traditionally, bank earnings are a precursor to credit cycle trends, as evidenced by the correlation between bank earnings and the SLOOS survey.

These findings indicate that the economic cycle is gaining momentum rather than slowing down. Should a cutting cycle begin, it is expected to be brief. The Q3 SLOOS survey results will be available around the time of the FOMC meeting in late July.

Chart 3: Expect lending growth to pick up in the fall