Welcome to this edition of the Watch series where we’ll take a closer look at US manufacturing, see if it can provide some guidance as to where in the business cycle we’re at, and ultimately whether the current momentum across most risk assets can be sustained – or maybe even add further.    

This is the first release in our “Cycle Week” where we try to assess where all major asset classes see the cycle heading given the current price action. We will release pieces on how FX, equities, credit and commodities inter-connects with the current cycle dynamic in the coming days. Stay tuned!

Key takeaways: 

• All components of the ISM PMI are now <50, but…

The latest ISM report didn’t make for positive reading. The PMI came in at 46, making it the lowest reading since the early days of lockdowns. In fact, all of the nine components in the report were below the 50-threshold defining contraction. That has happened only four times before since 2000; three times in 2001, once in 2009 and in March this year. You connect the dots.

Chart 1: All components of the ISM report are now <50