Nasdaq 100 Trails Bear Market Average?

Although the recent surge in U.S. stocks has been quite spectacular, strategists have indicated that the performance of the Nasdaq 100 Index remains below the average level during bear markets, and these indicators suggest that U.S. stocks may be at risk of being priced for a recession...

Macro strategist Simon White believes that U.S. stocks are still at risk of being priced for an economic recession. Here are his latest views:

U.S. cyclical stocks continue to suggest the risk of a recession, but there are signs that the recession will not be too severe. Despite the stock market's inflated rally, the potential weakening of the market's perception of recession risks could still further drive the rally.

Renowned investor Stanley Druckenmiller often refers to the internal performance of the stock market as the best economic predictor he has ever seen.

He believes that the stock industries with the strongest cyclicality will lead the economic cycle, and an indicator based on this assumption has recently fallen again.

As shown in the figure below, the unemployment rate is close to the level before previous recessions.

I agree with Mark Cudmore's recent view that the possibility of a recession is still high, and I think we may see it sooner.

Its signal is a general slowdown in economic activity and monetary tightening, which will be reflected in different industries and regions.

My recession indicator consists of 14 different sub-indicators, covering a wide range of parameters from credit spreads to Federal Reserve regional indices.

Generally speaking, before a recession, most of these sub-indicators will be activated simultaneously, thereby capturing the mechanical changes in the economic recession. The indicator continues to predict that a recession is imminent.Despite this, it does not provide information on the severity of the economic downturn. However, in this regard, an increasing number of signs suggest that the depth of the recession will not be too severe, and the main uncertainty factor is the credit market, which should be closely monitored.

Different cycles operating in the economy, such as the real estate cycle, inventory cycle, and business cycle, do not seem to reinforce each other, which helps to mitigate the economic downturn.

Truck sales also imply this result. They are an excellent leading indicator of economic activity. However, the indicator is currently on the rise. Combining it with car sales, we can see that although they were very close to recession levels last year, they now look healthy.

Therefore, an economic recession is still the base case, but it may not be as severe as expected.

In addition, although the rise led by artificial intelligence is vigorous, technology stocks generally still look cautious. Believe it or not, in fact, the performance of the Nasdaq 100 index is below the average in a bear market.