Multiple indicators suggest that the U.S. economy is on the brink of recession, with nearly 40% of the stock market at risk of collapse...

Economists say that although financial markets believe there is a zero chance of a U.S. recession in the coming year, a well-known recession indicator is flashing a red warning signal.

David Rosenberg, founder of Rosenberg Research, says that despite the strong appearance of the U.S. economy, it may be on the verge of recession.

He specifically pointed out the Sahm Rule — when the three-month moving average of the U.S. unemployment rate minus the low point of the unemployment rate in the previous year exceeds 0.5%, it marks the early stage of an economic recession in the United States.

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Historically, once the Sahm Rule is triggered, it usually means the economy is in the early stages of a recession, and the Sahm Rule has a high degree of accuracy. According to the creator of the rule, former Federal Reserve economist Claudia Sahm, her rule has successfully predicted every recession since the 1970s.

Although the rule has not yet shown that the U.S. economy is in a recession, according to the latest employment data, the U.S. is only 20 basis points away from a recession. Rosenberg pointed out that this level is similar to the level shown by the Sahm Rule before the recessions of 2001, 2008, and 2020.

"Various leading recession indicators stubbornly indicate that the possibility of a recession in the coming year is very high," Rosenberg said in a report on Monday. "However, according to our quantitative analysis, the pricing in the stock market, investment-grade and high-yield corporate credit markets reflects a market expectation of a 0% recession probability." He added: "(The recession) being delayed does not mean it is prevented," implying that a recession is still possible.

Rosenberg also pointed out other recession warning signals that have not attracted much attention. He cited data from the Federal Reserve and Haver Analytics to say that short-term U.S. Treasury yields reflect a nearly 100% possibility of a recession in the next 12 months.

Another well-known recession indicator in the bond market, the yield curve, shows that the possibility of a U.S. economic recession is about 60%.

However, these risks do not seem to have attracted the attention of investors. As the U.S. stock market continues to rise and the Federal Reserve appears ready to cut interest rates later this year, investors are beginning to lean towards the possibility of a soft landing. The latest investor sentiment survey by the U.S. Investment Association shows that 47% of investors are optimistic about the U.S. stock market trend in the next six months.At the same time, according to the CME Group's FedWatch tool, the market estimates that there is about a 50% chance the Federal Reserve will cut interest rates as early as June.

Rosenberg is one of the most bearish forecasters on Wall Street this year and has been calling for a recession for months. Recently, he said that the likelihood of a recession now is four times that of economic expansion, and a series of "underestimated" indicators show that the economy is weaker than it appears on the surface, suggesting a 39% risk of a stock market crash in the United States.