• Even though risky assets experienced a solid recovery last month, with the SP500 index up nearly 15% from its mid-June low of 3,636.90, the macro picture has not changed, and leading economic indicators are still pricing in a significant deceleration in the economic activity in the coming 6 months.
• For instance, the chart below shows that the OECD ‘Diffusion’ Index, which looks at the percentage of countries with rising leading economic indicators (LEI), is pricing in a global manufacturing PMI at round 45, well below the 50-line threshold that separates growth from contraction.
  • The number of economic countries with rising LEI fell from over 90% in November 2021 to 2% in February 2022 (only one country with rising LEI out of 39 countries).
• Historically, there is an existence of a non-linear relationship between global PMI and global growth: the further global PMI falls below 50, the more significant the global growth slowdown.
• How confident should investors be in the recent 'bull' retracement in global equities?

Source: Bloomberg/MNI