Shades of 2007 as Volatility Markets Ignore U.S. Recession Risk
- Wide gap between 1-year recession risk and implied volatility
- Spread between 1-year and 3-month vol to widen: Wells Fargo
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The renewed rally in U.S. equities has left volatility markets showing little concern that the good times will end any time soon. Recession models beg to differ.
Wells Fargo’s model -- which draws on the spread between three-month and 10-year Treasury yields as well as economic figures -- shows chances of a U.S. recession within 12 months jumped in December and climbed to just above 40 percent in January.