Recession Risk ‘Overpriced’ With Latest Sell-Off, JPMorgan Says

The slump in risky assets like stocks this week defied a slew of positive news. To JPMorgan Chase & Co., that’s a sign the markets are pricing in a worse economic outlook than it has.

The firm’s strategists led by John Normand looked at equity valuations and credit spreads for high-yield bonds leading up to past economic recessions in an investment outlook note to clients Friday, and found that both assets this year have developed a pattern reminiscent to those near the end of cycles. But that pessimism is overdone, according to the strategists, who see only a 20 percent to 30 percent chance of a recession over the next year, with a higher likelihood in 2020.