"There are certain words you don't want to hear in a medical checkup, or in an investment bank's recession outlook: "stable but elevated." It's a phrase that could refer to blood pressure, even risk of a heart attack, a favorite metaphor of hedge-fund legend Ray Dalio, or in UBS' evaluation, risk of a recession."
"The bank found that from May through July, the "hard data" from the U.S. economy has shown an elevated risk level, standing at a probability of 93% most recently. This sits at "historically worrying levels," UBS says, given this signal's track record of identifying turning points using data from the National Bureau of Economic Research."
"But when UBS zooms in to the hard data, it finds that while most metrics are turning negative, it's more in a "mile wide inch deep" kind of "malaise." None of the hard series of data is showing "signs of rapid unraveling," according to the team led by Pierre Lafourcade, resulting in an overall bill of health: "Soggy, soft, weak, yes, but not collapsing.""
UBS's hard-data model showed an elevated recession probability of 93% from May through July, a reading described as historically worrying relative to NBER turning points. The inverted yield curve stands 23% inverted and has risen sharply since early 2025. Building stress in credit markets lifted a credit-metrics recession probability to about 41%, roughly double January levels. The model relies on objective indicators such as personal income, consumption, industrial production, and employment while filtering out surveys, PMIs, and market signals. Most indicators are weakening broadly, producing a mile-wide, inch-deep malaise: soggy and soft but not collapsing.
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