Investors fear a recession but the data does not signal that yet.

Volatility in financial markets does go both ways. Stock prices moved higher last week, bouncing off cyclical lows and market interest rates declined from cyclical highs. We have reached an official bear market in stocks with a 20% decline from the peak reached at the beginning of the year. Market rates declined from the 15-year peak reached two weeks ago. This volatility reflects the uncertainty of the risks of recession as the Fed is trying to remove accommodative monetary policy and reach a neutral position in order to combat inflation pressures. At times like this, the politicians get involved in an effort to demonstrate they are doing something. This is just what they did in 2021 with the huge fiscal stimulus adding liquidity and funding the huge surge in final demand at a time when supply chain problems limited the availability of products.