Many key global index benchmarks are flashing approaching recession. October’s Consumer Price Index report by the U.S. Labor Department offered the latest conviction that inflation is falling. Whether true or not, many economists voice similar concerns that in the coming months global economy will be more impacted by rising unemployment (especially, hidden unemployment stemming from rapidly falling labor participation rates worldwide) and manufacturing slowdown than by rising consumer prices. The Federal Reserve’s increasing interest rates are slowing economic activity, and although moderating, inflation is still pressuring corporate operating margins. As a result, profits are falling, prompting many companies to reduce headcount.

As of the latest reading in the U.S., headline CPI increased 7.7% YoY, solidly below the 9.1% increase in June.Thus, Invesco’s DB Commodity Index ETF (DBC) , a proxy for most major commodities, peaked at $30.64 in June. It’s trading below $25 today.

The U.S. housing market, another key inflation input, is showing signs of relief, too. Rapidly increasing mortgage rates have put the hurdle on home sales, causing home prices to slide and home sale inventory to jump.

In Q3, FactSet reported that wobbling earnings growth for S&P 500 companies was an anemic 2.2%, the lowest since Covid climax resulted in corporate earnings plummeting in Q3 2020. Importantly, more companies downgraded their guidance down the road rather than at least keeping them intact. Specifically, 55 S&P 500 companies issued negative guidance, versus 27 issuing positive ones. As a result, Wall Street analysts have ratcheted back their earnings expectations.

In Q4, they expect the average S&P 500 company to see earnings per share decline by 2.1% from last year. In 2023, they’re estimating tepid growth of 1.6% and 0.9% in Q1 and Q2. It’s hard to believe that if earnings fall in Q4, those first and second-quarter earnings estimates will prove too rosy. Especially since revenue growth is also expected to drop, which will likely force employers' hands when it comes to layoffs.

Also, according to the latest conceptual article published in the Foreign Affairs by world’s renowned economist, strategist, President of Queens’ College at Cambridge University and Professor of Practice at the Wharton School, Mohammed El-Erian, the world may be experiencing major structural and secular changes that will outlast the current business cycle. Three new trends in particular hint at such a transformation and are likely to play an important role in shaping economic outcomes over the next few years: the shift from insufficient demand to insufficient supply as a major multi-year drag on growth, the end of boundless liquidity from central banks, and the increasing fragility of financial markets.