Lead-Lag Live: The Recession Narrative Changes Again

After two quarters of a declining GDP, the data for the third quarter showed a 2.6 percent annualized gain. That’s enough to suggest that the economy’s mild contraction in the first part of the year was hardly a recession.

That’s resulting in a change in narrative. While many still see a recession in 2023, it’s also possible that the current struggling economy may continue rather than get worse.

If that’s the case, then financial markets may not be in bad shape. A further decline may not be likely, especially as markets tend to move up over time. The market’s overall bullish bias may overcome the current bearish narrative.

Some see the need for markets to have a catalyst to move higher. However, history hasn’t always shown that to be the case. Bears and bulls alike are both trying to determine where things are in the market cycle.

With fewer bears in the market than bullish analysts, it’s easy for the bears to stand out. That’s especially true when the market has been selling off. But good news tends to sell well to investors.

Market conditions have caused forecasts to become more complex. And many indicators that have often led the market now have a shorter lead time. Some have even dropped to the level of noise.

Overall, changing times result in how market narratives can change. And right now, with the overall market looking bearish, things may fare better than expected going forward.

To listen to the full interview, click here.