***We release this article instead of our “Something for your Espresso” daily. Our normal live coverage will be back on Wed 27. We will release bits and pieces over the next 48 hours with forward looking discussions for 2024. Best wishes for the holiday season.***

The equity market has been celebrating over the past couple of months and it seems like the economic consensus is moving towards a soft landing or even a no landing / re-acceleration at lightning speed.

Equities tend to trade closely connected to the cyclical components of the US economy with a strong correlation between ISM Manufacturing and annual returns in the S&P 500. Most recent trends partially represent a bet on a rebound in the economic cycle in 2024, which looks unlikely in most of our medium-term forward looking models.

The good old industrial bellwether FedEx surprised markets negatively last week with decelerating air freight numbers and a weak 2024 guidance. Maybe it is worth listening to such signals, as they are typically fairly correlated to the actual subsequent cyclical growth trends.

The FedEx message rhymes well with our plethora of credit models with medium-to-long leads on the actual economic developments. Let’s have a look at why the credit impulse remains in the recessionary camp for 2024.

Chart 1: FedEx points to a muted/non-existent upswing in 2024