Chiropractic care originated in the late 19th century in the United States. Despite opposition from the medical community, it gained popularity in the early 20th century. Founded by Daniel David Palmer, a magnetic healer and former janitor, his belief was that spinal misalignments (a.k.a. subluxations) were the cause of many health problems.  In 1895, Palmer performed the first chiropractic adjustment on a deaf janitor, Harvey Lillard, who subsequently reported improved hearing. Palmer’s claims of having discovered a new healing method prompted his coining “chiropractic,” from the Greek cheir (hand) and praktos (done). Based on a mix of spiritualism, magnetic healing and traditional bone-setting practices, Palmer believed that the spine was the body’s nerve center and, as such, subluxations could interfere with the flow of nerve impulses. Established in 1897, the Palmer School of Chiropractic remains one of the practice’s leading institutions.

While Harvey Lillard benefitted from his adjustment, the same cannot be said for Chief Financial Officers (CFOs). This group reports it’s poised to make involuntary adjustments to their firms’ plans based on the administration’s policies. As we’ve seen in surveys across a spectrum of cohorts, the post-election rally in CFO optimism has been arrested. Tariffs and uncertainty are the ties that bind. The latest CFO Survey from the partnership of Duke University and the Federal Reserve Banks of Atlanta and Richmond is no exception. The headline economic optimism index fell to 62.1 in the first quarter from 66.0 in 2024’s last three months, nearly erasing post-election gains.

In special questions on hiring and capital spending, the Survey expanded: “About a quarter of firms reported that changes to trade policy would negatively impact their hiring and their capital spending plans in 2025. Next to tariffs and trade policy, changes in regulatory policy seemed most likely to affect hiring and capital spending plans, both positively and negatively.” The first chart in today’s quad illustrates these adjustments with the proviso that the form and timing of implementation play an important role in judging the timing of their impact. Net negative effects on planned capex (green bars) and hiring (yellow bars) were indicated by CFOs given the threat of Trade/Tariff and Immigration policies. Not as vexing are Corporate Tax and Regulatory policies. Nevertheless, the modestly positive effects, especially on the potential for capex, should be considered future, not present, tailwinds.

Markets also have been less friendly to CFOs as 2025 has gotten underway. The cresting in the S&P 500 is the most visible. While the pullback at quarter’s end has been modest, this low-frequency snapshot hides the heightened volatility that’s become endemic this year (light green line). Perhaps of greater import, merger and acquisition (M&A) activity has cooled noticeably as completed M&A deals look set to post the largest sequential decline in two years in the first quarter (orange line). Suffice it to say, this counters the Street’s expectation that a virtuous M&A cycle would by now have taken hold. Indeed, the -2.9-point drop in CFOs’ own-firm optimism not only reversed the post-election bump, but it also erased the sum of gains over the last year in the span of three months (purple line).

Using the narrow lens of month-over-month (MoM) performance, February Durable Goods conflicted with C-Suite occupants’ dour views – the 0.9% seasonally adjusted advance for nondefense capital goods shipments excluding aircraft was the strongest in over a year. Smoothing the longer year-over-year (YoY) trend confirmed the downtrend for this direct input into U.S. GDP. Seasonally adjusted core capex shipments have registered modest compression in the last three quarters: -0.7% YoY in 2024’s third quarter, -0.1% in 2024’s fourth quarter and -0.4% thus far in 2025’s first quarter (light blue line).

While these mild contractions don’t raise bright red cyclical warning flags, that’s not the message conveyed in the quarterly not seasonally adjusted path – which is supposed to be nearly identical to the seasonally adjusted one. This raw data series’ -1.9% YoY first quarter drop has historically been the sole preserve of whole-economy or industrial recessions (red dashed line).

We know that business investment is the key determinant of recession, which is why it’s our chief focal point given the current circumstances. After all, the recessions of 1970, 1981 and 2001 featured rising consumption. That should not diminish our attention to the power wielded, or not, by U.S. consumers when they too are increasingly distressed. On that note, yesterday, the New York Fed released a new analysis estimating that “more than nine million student loan borrowers will face significant drops in credit score once delinquencies appear on credit reports in the first half of 2025.”

As background, post-pandemic forbearance and the Fresh Start program (that marked all defaulted loans as current) generated sizable gains in credit scores (103 points for delinquencies and 72 points for default vis-à-vis yearend-2019). With that in mind, the NY Fed estimated a “shadow delinquency rate” to gauge the scope of the rise in missed payments after the 2023 resumption in payments. No surprise, this shadow rate reached a new high of 15.6% last year, taking out the 2018 prior high (blue line). New York Fed economists concluded that a new student loan delinquency can reduce credit scores by more than 150 points, leaving borrowers with scarred credit access. Further household balance sheet impairment would pile on cyclical impediments to those already challenging the U.S. economy.

Ed Peterson and his brother Carl founded the Peterson Rebuild and Exchange in 1947. Based in Boise, Idaho, the auto parts supplier was initially devoted to servicing and replacing engines at construction locations in remote areas of the Northwest. In the early 1960s, while visiting several dam sites, Ed Peterson was alarmed at accidents involving workers being injured or killed by heavy equipment backing up on them. As his son Mark recalled, “The flagmen weren’t working. So, my father got together with some electronics engineers and developed [something revolutionary].” Called the “Bac-A-Larm,” the reverse warning system Peterson patented sounded a beeping alarm when trucks and heavy machinery switched gears into reverse. Over the years, Peterson’s firm morphed into the current Preco Electronics, a designer and manufacturer of electronics that expanded its specialty beyond backup alarms to blind-spot monitoring and camera monitoring systems for the construction, mining, transport, utility and waste industries.

U.S. consumers are suffering the same sensation as the lucky dam workers who survived their injuries in the 1960s. In March, the Conference Board consumer confidence index fell to a post-pandemic low of 92.9, below the consensus estimate of 94.0 and last month’s revised 100.1. The forward-looking component drove the decline, falling to 65.2 from 74.8 in February. According to the Conference Board, “Consumers’ expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low. Meanwhile, consumers’ optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”

The report’s weakest link was the Fewer Jobs index. This gauge of employment expectations advanced for a rare fifth consecutive month to 28.5, a threshold associated with all six recessions from 1973 and 2009. To contextualize, the current reading is nearly in line with the peak point after 9/11 of 29.0.

With job prospects topping households’ worry wall, state-level consumer expectations, each of which implicitly includes a Fewer Jobs component (not published), revealed Red states getting shellacked. Ohio (-31.7 points), Michigan (-23.3 points) and Pennsylvania (-17.1 points) were notable standouts, while Blue Illinois (-27.0 points) also saw a month-over-month (MoM) plunge. The downdraft in consumer expectations was more than just a March story. Indeed, all eight large states that the Conference Board polls have backslid since December. The lineup from least bad to worst read as follows: Ohio, California, Texas, Florida, Michigan, Illinois, New York and Pennsylvania.

The -55.0-point compression in the Keystone state thus far this year (lilac line) looks very much like the (inverted) rise in Fewer Jobs (purple line). Conveniently, yesterday’s Philadelphia Fed’s non-manufacturing survey release allowed for a cross check — the contraction in Current Full-time Employment, to -7.5 in March from 2.5 in February, the first decline since last August, ratified the labor concern (yellow bars). Since the survey’s 2011 inception, negative reads have been domiciled in the 9^th percentile of the left tail.

Households’ challenged purchasing power has been a recurring theme as 2025 unfolds. Conference Board Income Expectations upped the ante on the narrative, gapping down by 5.2 points to 0.8, the largest MoM decline of the current cycle and off November’s local high of 8.6 (light blue line). Mapping Income Expectations to real Personal Income less Transfer Payments introduces downside over the remainder of the first quarter from January’s 1.5% year-over-year (YoY) gain (orange line). Historically, Income Expectations have reliably anticipated turning points for the National Bureau of Economic Research’s U.S. recession indicator.

Impaired household purchasing power necessarily invites upon purveyors of goods and services compromised pricing power. To that end, yesterday’s Richmond Fed services survey for March had margin squeeze written all over it. Expectations for Prices Paid advanced to a two-year high of 5.1% while Future Revenues (yellow line), Future Employment (green line) and Future Wages (blue line) tanked in tandem. The abrupt reversal in Future Revenues is a notable change agent for near-term prospects for jobs and wages – from the series’ record high of 59 in November, the 37-point decline to 22 through March has no precedent since the survey’s 2010 inception. Businesses that foresee depressed sales will continue cutting costs to safeguard margins.

In a third theme that’s becoming more pervasive into the second quarter, planned capital expenditures continue to worsen. Combining the three regional metrics for equipment and software expenditures via the Philly Fed non-manufacturing and the Richmond Fed’s manufacturing and services surveys yielded a stalled reading of 0.1 in March (light green line). This month’s -7.0-point MoM reversal was the sixth largest on record and the biggest in nine years. Meanwhile, real equipment and software investment continues its rundown that started in 2023 (fuchsia line). Should the message for investment from the Third and Fifth Districts reverberate across other regions, it would be yet another red flag for the labor market. Recall that business investment, not consumption, is the prime determinant of recession.

Put it all together and appreciate that “beep-beep” sound you’re hearing is the truck backing up on a further Treasury market rally. We now have Conference Board Fewer Jobs aligning with the University of Michigan’s Higher Unemployment Expectations. The Fed is further and further behind the 8 ball, rendering every Thursday’s weekly jobless claims that much more critical to the near-term outlook.

Try telling Alanis Morissette that art is art and should not be taken literally. Her 1996 smash hit “Ironic” spoke of ‘rain on your wedding day’ and ‘a traffic jam when you’re already late,’ which did not define irony. Years later, in a 2008 London Timesinterview, she was asked if she’d worked out the meaning. Her reply: “Yes, I’ve now learned the definition of irony – but the dictionary now says that it’s a coincidence and bad luck, too – not that I don’t deserve a little slap on the wrist for my malapropism. I always tell people that I’m the smartest stupid person you’ll ever meet.” Co-written with Glen Ballard, who produced the Jagged Little Pill album, he evoked in a Spotify Landmark session: “I recall her saying something like, ‘Wouldn’t it be ironic for an old man to win the lottery and die the next day?’ We were fresh with this thought when we walked into the studio 10 minutes later. This was the beginning of the true magic between us.” ‘Tis true as “Ironic” was her highest-charting single on the Billboard Hot 100 chart, peaking at No. 4.

What grabbed us yesterday was not of the single, but rather the double variety. The number 23 stood out. Sharing bankruptcy news with Dr. Gates, Danielle posted that “23&Me filed on the 23rd. No poetry. But still ironic.” With that and two other filings on March 23rd, the monthly run rate for Bloomberg’s large bankruptcy count (chapter 7s & 11s, $50 million-plus in liabilities) was tracking at…wait for it…23. Ironically, if the pace holds, it will match the August ‘23 cycle high of 23.

S&P Global’s manufacturing purchasing managers’ index (PMI) was also riddled with irony. At a still-elevated 71.8 this month, Future Factory Output attained a +0.5 z-score (red line, top left). S&P’s explanation: Optimism was tied to “hopes of stronger demand amid supportive trade and other policies, such as lower taxes.” Higher tariffs making supply-chain purchases more expensive with the potential for retaliation? That’s “optimism”? Tack on New Orders, Backlogs and Employment, all of which eased in March to below their long-run trends, chalking up z-scores of -0.3, -0.7, and -0.6, respectively (green, blue, and yellow lines, top left). Perhaps stretching into a third year of below normal means the only direction for the industrial outlook is ‘up’?

Though the deceptive headline was upbeat, the outlook broadcast by S&P’s service PMI was in the opposite direction vis-à-vis its factory counterpart, with Future Business Activity falling for a third consecutive month in March. Three-month losing streaks are so rare for the series that dates to October 2009, they’ve only registered in the 2012-13 European recession, the 2018-19 U.S./China trade war and 2025’s first three months. Per S&P: “The deterioration in service sector confidence was attributed to concerns over the adverse impact on demand for services and financial markets of federal spending cuts, tariffs and wider policy changes from the new administration.” The -1.1 z-score for the service outlook (red line, top right) ran below corresponding measures for New Business (-0.2), Backlogs (+0.2) and Employment (-0.6) (green, blue, and yellow lines, top right). The pessimism relapse should take service fundamentals back down in coming months.

Yesterday’s Chicago Fed Survey of Economic Conditions (CFSEC) corroborated S&P’s downbeat stance with the Current Economic Activity hitting -10 in March after a brief flirtation with positivity of +4 as recently as December. The labor-intensive nonmanufacturing sector drove the renewed weakness. Looking ahead, the 12-month Economic Outlook crashed to -32 from +43 in December (inverted orange line). A majority of 54% of respondents anticipate a worsening in economic activity. Most importantly, the pandemic notwithstanding, the -74-point three-month collapse has no precedent.

Chicago area businesses are ideal full-economy proxies. That context constitutes a national read-through via Chicago’s forward prisms of Capex Expectations, which slumped to a seven-month low of -30, and Hiring Expectations, which plumbed to a nine-month low of -27. The abruptness of the breakdown in the CFSEC economic outlook carries grave implications for the national jobs market. To that end, we caution against reading too much into the recent trend in Unemployed Not on Temporary Layoff (i.e., permanent job losers and persons who completed temporary jobs). After a relative improvement to a 4.6% year-over-year (YoY) rate from 21.0% YoY in November, there’s no reason to anticipate the recovery having staying power (purple line).

A view from the C-suite injects yet another element of irony. On the heels of the post-election tariff terror campaign, Chief Executive CEO Confidence index plummeted in March. On a scale of 1 (Poor) to 10 (Excellent), CEOs’ rating of current business conditions fell 29%, from 7.01 in December to 4.99 in March, making for the weakest reading in 13 years (inverted aqua line). Corporate forecasts 12 months out for revenues, profits, capex and headcount all have been marked down. One might deduce that such downtrodden expectations would portend poorly for default risk. Indeed, CEO Confidence has historically closely tracked the CDX index for U.S. high yield…until last December (lilac line). Since then, the CDX has risen by less than a third (up denotes higher risk) of how much CEO Confidence has fallen. The bad news is public markets remain overly sanguine on defaults. The good news it’s still dirt cheap to buy an insurance policy to protect your portfolio from a storm that’s guaranteed to come onshore.

Chinese checkers. Koala bear. Funny bone. All are “misnomers,” incorrect labels for what they describe. “Misnomer” also applies to the Cocteau Twins, who were neither French nor genetically identical siblings. Rather, the band was a trio of Brits—Simon Raymonde, Robin Guthrie, and Elizabeth Fraser—who were progenitors of an ethereal style of music we now call “dream pop.” It’s fitting their name is ill-fitting, as their music eschewed traditional lyrics in favor of random phrases, mispronunciations, and unintelligible gibberish. And yet, even without clear words, the songs captured emotions that resonated with fans worldwide. Their most acclaimed album was 1990’s Heaven or Las Vegas, but despite its commercial success, label 4AD dropped the band shortly thereafter. In a retrospective review, the music publication Pitchfork gave the album a rare perfect “10” rating, arguing that “if punk had chased beauty instead of glorious ugliness, if goth had emphasized light rather than fetishize darkness, those movements might have sounded like the Cocteau Twins, who had contemporaries but no real peers.”

In that spirit, we’ve all heard “What Happens in Vegas stays in Vegas.” The catch is right now not much is happening in Sin City. News articles and anecdotes abound of how strangely quiet the city feels. On Friday, the Las Vegas Review-Journal published, “Nickel and Dimed: Are Las Vegas Casinos Pushing Visitors to a Tipping Point?” The latest January statistics via the Las Vegas Convention and Visitors Authority reflect convention traffic, i.e., company-expensed travel, rose 12% year-over-year (YoY). Total visitors, though, were down 1.1% YoY.

The Strip may be sleepier than usual, but there’s no beauty rest to be had for the nation’s bankruptcy attorneys. Bloomberg’s tally of large-firm bankruptcies, those with at least $50 million in liabilities, is on track to close the month at 20, the most since November’s 22 and the highest March figure since 2009 (blue bars). The monthly average run rate of 16 since January 2024 is nearly double the 2015-2019 average of 9. As for whether this engine is shutting down any time soon, we are guided by the Conference Board’s ratio of Leading and Coincident. Historically, this ratio declines into and during recession (inverted purple line). Since peaking at 1.109 in December 2021, it’s spiraled to its current 0.881, the lowest since August 2009. With no bottoming in train, it’s premature to forecast an arresting of the elevated pace of bankruptcy filings.

Job losses catalyzed by these closures will maintain pressure on the public’s wherewithal to spend. Proprietary data from Bank of America illustrates the tension curtailing consumers’ plastic use. The classic angel on one shoulder is telling them to “Put it back on the shelf!” while the devil on the other is saying “Add to cart and click checkout!” For much of the last two years, total credit card spend has been pulled in different directions by brick & mortar and online sales, with the former contracting and the latter expanding in the low-single digits YoY. As of March 15, the 30-day moving average of credit card spend has slowed to a crawl, at 0.2% YoY (green line). Online’s 3.3% YoY, meanwhile, is besting in-store’s -2.0% (orange and fuchsia lines). Though not pictured, we thought it important to point out that some of the worst-performing categories of spending right now in BofA’s data are Entertainment (-18.9% YoY), Airlines (-6.9% YoY), and Lodging (-5.0% YoY).

We’ve written at length about the rise of “Buy Now Pay Later.” Given the ease with which e-commerce facilitates this 21^st-century form of layaway, it’s no surprise online sales are propping up plastic’s spend. Soon, consumers will also have the option to “Eat Now Pay Later” on DoorDash, thanks to the firm’s recently announced partnership with Klarna. A Tweet from meme account Litquidity captures the insanity of this “innovation”: “Excited to announce I just closed on the acquisition of a $14.43 Cava bowl after minutes of intense due diligence and secured a 4-month interest-free loan via Klarna credit.” Some jokes really do write themselves.

As consumers seek to stretch their shrinking budgets and use BNPL to defer bills until after payday, the risk to the travel sector is clear. Hotel rates concur with Conference Board Vacation Intentions as more U.S. households opt for “staycations.” Per STR, revenue per available room (RevPAR) has been range-bound in the low single-digits YoY since mid-2023, with rare blips into negative territory. March, however, could be seeing the start of a deeper inversion, with the week of March 15th, the latest available, slipping to -4.2% YoY (red dot). Ignoring the pandemic, which saw rates cliff-dive and moonshot, this would be the worst monthly showing since December 2009. Per Citi Research, several leisure markets were particularly hard hit in mid-March: Anaheim (-27.8%), Orlando (-12.8%), Denver (-13.2%), Miami (-7.8%), and Oahu (-4.2%). Got Spring Break?

Despite falling prices at the pump, auto sales appear poised to decline in the coming months. Indexing both University of Michigan Auto Buying Conditions and average new vehicle incentives to January 2019 makes clear that both attempts at recapturing their pre-pandemic levels have failed (yellow and teal lines). With both rolling over to start 2025, the upward trajectory in auto sales from a 12-13 million SAAR range in late 2021 to February’s 16-million pace looks primed to reverse (blue line). To state the obvious, tariffs won’t help, further shrinking OEM incentives in a tacit attempt to pass the effective tax onto consumers. Perhaps a last-gasp jackpot on a trip to Vegas will?

I’ve heard of, and heard, cat fights my whole life. But a bird fight? Once the sole preserve of nature shows, David Attenborough, and now Tom Hanks, describe – in Masters’ Golf Zen voices – a male bird vying for the attention of a fickle female that’s attracted his main rival. Yesterday, in this peaceful Riviera Maya enclave ensconced in mangroves, a bird fight broke out. With a merciless blasting of the eardrums, cats scattered, dogs cowered, and even the domesticated raccoons made themselves scarce! It was not the scarlet Northern Jacana, nor the elegant, Black-Necked Stilt, or the verdant Aztec Parakeet, but rather the Chachalaca. Known by their Mayan name Baach, locals describe these birds as charismatic. Hmmm. The dull-colored Chachalaca’s long, chicken-like neck and portly midsections harken an image of an overweight quail. They resemble fowl and are indeed foul. Hidden in trees, chachalacas belt out “songs,” delivered as screeching, violent arguments, or, if you prefer — a bird fight. No doubt, unwilling early-riser visitors wish this species a good riddance upon departure. And yet, locals cherish their native squawkers. Together, in hideous harmony, Chachalacas sound like they’re singing “The Sun is Up!” in the local Yucatan language.

The sun, no doubt, will rise tomorrow, and the next, in the Yucatán as it welcomes vacationers from other parts of the world. Alas, I will be back in the States, not sad to be home, but more so missing my littles, middle and big once again. This bird, sporting an empty nest most of the time with two at Culver and the other two at McCombs, is nonetheless happy to have the Vitamin-D-infused memories of this past Spring Break with me forevermore. And aside from some Fed Day drama, I dare say I didn’t miss much. Federal Reserve officials, as we succinctly and damningly demonstrated in yesterday’s Feather, are woefully oblivious to the magnitude of the policy error they’re committing. In case you missed it, go back and read every single word…twice.

It’s some of the most important proprietary research QI has ever conducted, with this as the bottom line to end all bottom lines: “If the average (post-1970) 1.6-percentage-point advance (in the unemployment rate) is applied to the current picture, we would be staring down the barrel of a 5.7% jobless rate in 2025’s fourth quarter. This would make a mockery of the Fed’s median projection of 4.4%, released with yesterday’s Summary of Economic Projections, and sell-side’s consensus forecast of 4.3%.” If you’d prefer a graphical depiction of “It’s (not) different this time,” behold the historically asymmetric risk to the unemployment rate (fuchsia line) once the University of Michigan’s Higher Unemployment Expectations have gone full-tilt vertical (aqua line).

More evidence of what’s to come hit the economic calendar Thursday morning. We refer to Future Backlogs as the leading indicator that leads all others with good reason. This consistent gauge of future demand for labor, depicted as an inversion, has never failed to weaken with such persistence as that revealed in the Philadelphia Fed’s manufacturing index (orange line) without heralding an enduring rise in continuing jobless claims (purple line). While this latter weekly metric has seemingly stalled at a November 2021 high, a fresh round of layoffs arriving at Amazon, IBM and Morgan Stanley is poised to pressure upward the ranks of continuing claimants as they’re joined by displaced public sector workers.

Chemicals start the distribution pipeline; they are the basic building blocks of all things produced on factory floors nationwide. Because the Philly Fed has a rich history to 1968 and is the chemicals’ hub, investors are calmed when they see expected demand outrun its supply counterpart. This relationship, however, inverted in March as Future New Orders dipped below Future Inventories (red line). And while past inversions have accompanied the stagflationary 1970s and preceded the 1973-1975 and 1980 recessions, we’re leaning more on the single-largest two-month decline in Future New Orders as a signpost (green bars), compounded by the 79% of Philly-District firms citing acute policy uncertainty as a reason to pull back on capex in coming months. The days of stockpiling, in other words, have given way to planning for a growth slowdown.

Slowing growth necessitates the opposite of the need for more warm bodies. Reflecting that, Philly’s Future Employment, and, just in case, its Future Workweek, as hours worked look to be slashed, sunk so low as to register normalized z-scores of -0.26, the lowest since last August, and -1.24, which hit the lowest since October 2023 (blue and teal lines, respectively). But as we’ve emphasized since the Empire manufacturing disappointed to start this week, the economy’s biggest employment sector is the service sector. As proxied by the nation’s biggest service state, a.k.a., New York’s Future Employment z-scored a -1.03, the lowest since October 2020, when much of the country thought the world was ending (lilac line).

One final note on that bellwether the market once trusted, i.e. initial weekly jobless claims, we would add two punctuation points. Claims are up 8% over the last year and the four-week-moving-average has steadily risen week in and week out (green line). We don’t look for that to change given the saturation of the gig economy and shrinking paychecks for ride-share drivers. This tells you that the job market’s shock absorber has been worn paper thin as evidenced by the recent and pronounced rise in Google searches for “File Unemployment” (yellow line). More importantly, the bond market ain’t buying Powell’s specious reassurances about the “solidity” of the labor market as evidenced by falling yields. Traders hear the Fed chair’s talk and try to tune it out as they would the screeching of Mayakoba’s Chachalacas.

“A tsunami is caused by a large and sudden displacement of the ocean. Large earthquakes below or near the ocean floor are the most common cause, but landslides, volcanic activity, certain types of weather, and near-earth objects (e.g., asteroids, comets) can also cause tsunamis. Like the earthquakes that generate most tsunamis, scientists cannot predict when and where the next tsunami will strike…But, the Tsunami Warning Centers [at the National Oceanic and Atmospheric Administration and National Weather Service] know which earthquakes are likely to generate tsunamis and can issue tsunami messages when they think a tsunami is possible. Once a tsunami is detected, the warning centers use tsunami forecast models to forecast wave height and arrival times, location and amount of flooding, and how long the tsunami will last. In some cases, when the source of a tsunami is close to a coast, there may not be time for the warning centers to issue a detailed forecast for all at-risk coastal areas, so people should recognize natural warnings and be prepared to respond to them.”

Predicting a tsunami for the U.S. economy – or for financial markets, for that matter – is akin to donning a Chicken Little costume. Under the premise that everything is connected and knowing that there are no such phenomena as coincidences, there is hope that some form of cyclical indicator can stand as a rock-solid form of forward guidance. For us, it’s like unearthing the Holy Grail. Our regular readers, however, know our faith in the concept of “hope” – it’s never a strategy.

There is one gauge, though, that’s never failed to be the first domino to fall in cycles: Higher Unemployment Expectations via the University of Michigan. On Monday, we illustrated the self-fulfilling nature this leader exhibits as a harbinger for rising initial jobless claims once the 60-level has been pierced in previous cycles. Today, we use those historical timestamps as quarterly markers to anchor the Federal Reserve’s Summary of Economic Projections (SEP).

From a U.S. growth perspective, Higher Unemployment Expectations’ hitting the critical mass threshold north of 60 occurred during five prior recessions. In the sole exception of 1979, when the unemployment rate seemingly spiked overnight, this ‘ceiling’ was pierced two quarters before the start of the 1980 downturn. The common denominator is how much red is observable not just in the current quarter’s sequential showing (first column) but also in the cumulative growth profile out a few more periods. In five of the six episodes, the collective growth impact was decidedly contractionary (the cumulative four-quarter percentage, far right column). Defined by the shock of 9/11, at 1.3%, the 2001 recession in that year’s third quarter was the only exclusion, demonstrating an emerging recovery built on unique patriotic underpinnings that far out.

The Fed’s calendar year 2025 median projection calls for a 1.7% YoY increase in U.S. real GDP.

The evolution of the rate of core PCE inflation paints a picture of conflicts over the previous six cycles. The episodes of the supply-shock-ridden inflationary 1970s showed either a steady core (1970) or higher underlying prices pressures (1974, 1979-80). The embedded nature of inflation risks and the Fed’s policy missteps in the latter two saw sizable accelerations, from 5.9% to 9.8% YoY, and from 7.4% to 8.9% YoY, respectively. The last three jobless chapters in 1990-91, 2001, and 2008-09 flagged a completely different outcome as core disinflation was evident in a respective fashion from 4.2% to 3.4% YoY, from 1.8% to 1.6% YoY and from 2.2% to 0.9% YoY. Driven by a biased media brandishing foregone conclusions, the tariff terror campaign would have you believe the only path for core inflation is higher. The aftermaths in the most recent three examples are closer to the reality that should ensue as 2025 unfolds. At work will be a balance sheet recession grounded in crippled household finances that weighs on the economy’s capacity to fight downward pressures.

Where Higher Unemployment Expectations’ rubber grips the road is the unemployment rate. Every prior instance featured a sizable increase in unemployment from the current quarter to the one four quarters forward (Unemployment Rate table, far right column). Moreover, Higher Unemployment Expectations’ past signaling was so robust that no quarters after the current column in past cycles registered sequential declines. To be sure, if the average 1.6-percentage-point advance is applied to the current picture, we would be staring down the barrel of a 5.7% jobless rate in 2025’s fourth quarter. This would make a mockery of the Fed’s median projection of 4.4%, released with yesterday’s SEP, and the latest sell-side consensus forecast of 4.3%.

Another area lacking in equivocation is the Fed’s reaction function. Material rate cuts from the current quarter to four quarters hence (Fed Funds table, far right column) were pursued in every single cycle. Even in the 1970s, when the Fed was still tightening as the unemployment rate initially rose, policymakers eventually reversed course in favor of backstopping their newly minted maximum employment mandate. Here we find the greatest discrepancies vis-à-vis the Fed’s median Federal funds rate projection, the sell-side consensus and current pricing in futures and swaps markets, all of which call for 50 basis points by year-end. Reactions in the past have far exceeded this historically benign response.

Let’s be clear. Yesterday, the Federal Open Market Committee ratified market expectations and the unanimous consensus call of 108 economists, holding the funds rate in the 4.25-4.50% range. The policy statement revealed no signs of concern regarding the unemployment picture and restated verbatim that of January’s confab: “…labor market conditions remain solid.” Powell & Co. again bragged of flexibility on both sides of the dual mandate. There is no sense of urgency to act.

Danielle’s hypothetical conversation that she had with herself (and shared with Dr. Gates) applies here:  “How far behind the 8 ball is the Fed?” “It’s funny you ask.”

There is but one sun and one moon, at least in our world. Equally, there is just one unemployment rate, the most visible economic indicator in the eyes of the general public. When household fear has risen to the same degree as it has today, an economic tsunami has already hit America’s shores – past tense. When Higher Unemployment Expectations flare to today’s extremes, history has proven that large job dislocation follows.

The Fed has never escaped its calling to support the labor market through aggressive easing actions when joblessness rears its ugly head. And while we concede that history may not identically repeat itself, any semblance of rhyme this year would catch the central bank woefully off guard. Can the same be said of the forecasting community and market participants? Of course. But these constituencies are not honor bound to serve anything but the profitability of their benefactors, not the public good as are the independent, apolitical shepherds of the U.S. economy and every hardworking American. We say this with no scintilla of hyperbole, but rather with every bit of warning and gravitas merited at a time when Federal Reserve officials are either willfully blind to the plight of those it serves, or worse, in direct dereliction of their duties.

“Cha-ching!” No other sound rings truer to the sound of commerce than does that unmistakable chime from the first generation of cash registers. Because these early mechanical devices were designed without printing receipts, they pealed to alert business owners that a sale was made. No surreptitious moves by quiet employees need apply. The moment the total key was pushed, the drawer opened, and a bell rang, alerting managers who both heard and saw dollar signs. The bell’s installation was designed to surveil in more ways than one to deter embezzlement. It not only clanged to signal a sale made, but also if the drawer was even opened, hence odd amounts like 49-, 95-, and 99-cents at the end of prices, all the better to necessitate change being made in quarter, nickel, and penny increments

Conspicuously short of “cha-ching!” there was nothing odd or equivocal about the headline out of February’s New York Federal Reserve Survey of Consumer Expectations (SCE) Credit Access Survey: “Consumers Expect More Difficulties, Rejections in Obtaining Credit.” The report pulled no punches, flagging households’ heightening anxieties about an imminent tightening in lending standards. This four-times-a-year survey gelled with the higher frequency monthly core SCE. Released March 10th, last month’s survey revealed an eight-month high in respondents’ expecting credit will be harder to obtain a year hence and one in seven fearing they’ll fail to make minimum debt payments in the next three months.

Nodding to the quickly deteriorating job market, the ‘rejections’ survey found that in the coming 12 months, “The share of discouraged borrowers, defined as respondents reporting that they did not apply for any credit because they did not think they would get approved (despite reporting a need for credit), reached 8.5%, the highest level since the start of the survey in October 2013 [yellow bars].” The 300-basis point gain from June 2024, two surveys ago, also has no precedent.

Mortgage rejection rates are slamming the door shut on home prices. Over the past 12 months, rejections for mortgage refinancings pole-vaulted to 41.8%, nearly double October 2024’s 22.0% and the most abrupt sequential increase in the survey’s history (light blue line). In technical terms, lenders are denying asinine drive-by appraisals. The cautious lender sentiment also speaks to future home mortgage denials. Here, too, expected rejection rates rose to 47.6% matching the October 2023 high point (red line).

This year’s spike in the University of Michigan’s Higher Unemployment Expectations suggests lenders will keep playing hardball even as tenants do the same to landlords. We repeat: You can’t squeeze blood from a rock, but you can squeeze the life out of margins.

It’s no wonder households report fraying financials. The average likelihood of being able to cough up $2,000 in the event of an unexpected need within the next month collapsed to 62.7%, a fresh series low. Digging through the demographics, those in the middle credit score range — between 680 and 760 – report the most dramatic about-face, from February 2024’s four-year high of 70.9% to 66.0% one year on (lime line). The same sad song played for those in the middle age bracket  between 40-59, who saw a sizable compression from June 2023’s high of 68.2% to 62.6% (orange line). Further down the age scale, the youngest cohort (40 and under) indicated a more severe drop to a new cycle low of 54.3% (purple line). All three of these metrics stand either below or near the bottom of pre-pandemic ranges. These groups also are more likely to have student loans. Coming up with two grand will be more difficult relative to others up the FICO and age scales.

Keeping with the New York Fed, where things have no doubt been hopping as the Markets Desk there prepped for this week’s FOMC meeting, the Second District Business Leaders survey had a decided negative ring to it. The headline index fell to -19.3 in March from February’s -10.5, marking the sixth straight contraction and weakest print since January 2023 (aqua line). Driving the nosedive was the Current Business Climate — March’s crash to -51.7 completed a 30-point plunge from January’s -21.8 (lilac line). The only other two-month drop of a greater magnitude was clocked in September 2007. New York also boasts the highest concentration of labor-intensive services employment. As such, it won’t surprise you that the four-month stretch in negative terrain for Current Employment since December 2024 is the sole preserve of recession (blue line).

More ominously, Future Employment is flirting with contraction; at 3.8, March is a far cry from a trend-like 19.6 as recently as January. Applying our favorite normalizer, the March figure scaled to a -1.0 z-score. Future Capex was even more bearish, posting a rare subzero print of -3.9 this month (inverted teal line). Capex and Employment are the peas and carrots of the dismal science meaning the Empire State’s 4.4% steady unemployment rate for the last year is in for instability to the upside (fuchsia line).

Will New York Fed President, FOMC Vice Chair and permanent voter John Williams voice his concerns as Powell et al choose a statement today? While he may toe his boss’ line to avoid the disruptive optics of dissent, you can bet he was heard above the din given his insights on how rapidly the service sector unemployment rate is rising to say nothing of how alarmed all U.S. households are about their household finances and job prospects.

Frenchman: “Your mother was a hamster, and your father smelt of elderberries!”

Low-budget comedy troupes often resort to playing multiple roles to make feature films. In 1975’s Monty Python and the Holy Grail, Graham Chapman, John Cleese, Eric Idle, Terry Gilliam, Terry Jones, and Michael Palin played four, seven, eight, seven, six and ten characters each, respectively. With a budget of £282,035, Holy Grail went on to pull in £2,358,229 for its initial run. That year, the movie grossed more than any other British film screened in the U.S. Since then, it’s been treasured as one of the greatest comedies of all time. One of QI’s favorite scenes is when Cleese, as a taunting French guard, tires of small talk with King Arthur and his knights. To salve said boredom, Cleese’s character hurls insults their way…literally. Arthur’s final threats are met with a salvo from the Frenchman’s side: a cow launched over the castle wall taking out one in the knights’ entourage!

Yesterday, concurrent with U.S. Retail Sales disappointing bulls vis-à-vis rosy consensus estimates even as the prior month was revised downward, the Empire manufacturing survey landed just as welcoming as a gigantic, unexpected cow would have. The -20.0 headline came in below every forecast in Bloomberg’s survey at a walloping 10 times worse than the consensus estimate of -1.9.

A cursory glance could have generated yet another stagflationary scare. Current New Orders fell to -14.9 in March from February’s 11.4, slumping further off November 2024’s three-year high of 20.7. Supply vaulted to a 3-year high with Current Inventories climbing to 13.3. Through the prism of the New Orders-Inventories spread, supply and demand are acutely imbalanced as, the pandemic aside, March’s -28.2 was the worst in history (light blue line). This month also marked a 2-year high of 44.9 in Current Prices Paid, a third straight advance to then double December’s 21.1 (lime line). Amid weakening growth and amplifying cost pressures, Current Employment stayed in the red at -4.1 from February’s -3.6 (purple line). The current count: Four attempts at a manufacturing labor recovery in New York have failed.

Danielle’s post in QI’s Pro chatroom summed up the truer takeaway: “Empire further disabusing the “Stagflation INCOMING!!” hysterics. It’s more like the mother of all margin squeezes. Sell-side equity analysts gonna need a bigger eraser.” Future Prices Received fell to 38.8 from 42.4 in February, flagging a botched pass-through to factory gate prices to counter the threat of tariffs.

Industrial margins weren’t the only things getting squeezed. Restaurant receipts are off to a rocky start to 2025. In the last three months, nominal food service sales posted month-over-month (MoM) showings of -0.7% in December, 0.0% in January and -1.5% in February. We should note this maintains a weakening trend that kicked off in 2023. On a smoother quarterly basis, the year-over-year (YoY) path has eased from 2023’s third-quarter peak of 10.3% to 2025’s quarter-to-date average of 2.8% (aqua line). The cutback is more obvious when restaurant sales are adjusted for inflation. Using the consumer price index for food away from home to deflate, real food service sales have been on a YoY decline since 2024’s third quarter (fuchsia line). As rare as annual drops are, their manifestation stands as a cyclical marker, reinforcing recession.

On that note, we enter as Exhibits B & C housing and autos. Thus far in 2025, retail sales of home goods (the sum of furniture & home furnishings, electronics & appliances, and building materials) fell at an annualized rate of -8.0% relative to the prior quarter. Retail sales of motor vehicles & parts declined at a similar -8.5% annualized pace. These moves too are the sole preserve of recession.

Consumer buying conditions corroborate. Averaging the University of Michigan’s Home Buying and Durable Goods Buying Conditions yields a depressed near-60-mark, on par with the lowest point of the 1980 recession that was engineered by way of credit controls (yellow line). The thing is, Uncle Sam is no impediment this time around, i.e., home-related retail sales that rolled over in February to a -0.2% YoY rate face marginal downside (blue line). Notably, in March, Auto Buying Conditions completed the right shoulder of a “head-and-shoulders” pattern putting the current read of 52 in line with yearend 2022 and below any prior recessions since 1980 (red line). Once again, the sole setup is further downside.

More than California wildfires and ‘aberrant’ Southern snowstorms are at play here. To illustrate, QI Pro Randy Woodward shared a chart of Capital One’s net credit card charge-off rate rising to a cycle high 6.35% in February, which defies the month’s unemployment rate of 4.1%. With an eye to hard data on joblessness playing catch-up, we warn that household credit risks showing up on bank balance sheets are merely delayed, not avoided.

We’d regret our own failure to make mention of yesterday’s meltdown in homebuilder confidence. While we’ll touch more on this series and its internals as the week’s balance of housing data are released, we’d at least set the table with a friendly reminder of last the February headline National Association of Homebuilders’ Index fell to 39, which heralded the largest single-year drop in U.S. home sales in more than two decades. We know history only rhymes. But cover your ears if you’d prefer to not be reminded that more than 25 subprime lending firms went belly-up in February and March 2007.

If you find yourself road-tripping across western Montana, we recommend you take a detour off Highway 93, just north of Missoula, to the Garden of One Thousand Buddhas. An unexpected scene in “cowboy country,” it features as many handmade statues of the world’s fourth most-practiced religion’s founder as its name suggests. Situated in a wheel formation around a central shrine to Yum Chenmo, the statues seemingly pay homage to the “Great Mother,” who represents perfect wisdom and enlightenment. A Buddhist scholar from Tibet, Gochen Tulku Sang-nag Rinpoche, is responsible for bringing the garden to life. He chose the Treasure State location at first glance, having recalled a childhood vision of a peaceful retreat adorned by a mountainous backdrop. Dream became a reality when the site was purchased in 1999, and the first Buddha statue was crafted. Today, the garden is a Buddhist center and refuge for passersby of all creeds to quietly reflect and clear their minds. Their stated mission is to “bring about positive transformation within those who visit, in response to the negativity that abounds in the world today.”

If there’s one thing U.S. households are in dire need of right now, it’s some zen. Such was the signal emanating from Friday’s preliminary March survey via the University of Michigan. Headline sentiment fell from 64.7 to 57.9, underwhelming the 63.2 consensus, and year-ahead inflation expectations shocked with a six-tenths increase to 4.9%. And yet, prices for two of the most visible items in household budgets, eggs and gasoline, continue to fall. Per the USDA, the price of a dozen large eggs delivered to stores is now $5.12 per dozen, a 39.5% decline from February’s peak of $8.47. Meanwhile, the average price per gallon of gasoline has ticked down to $3.076 per gallon, 2.7% below mid-February’s $3.16 and 16.4% off last April’s $3.68 peak.

Despite the tariff terror campaign heightening inflation fears, and blessedly not actual inflation, the litany of job cut announcements and bankruptcies substantiate joblessness concerns. After crossing the 50% threshold in February, Higher Unemployment Expectations spiked to 66% in March, their worst since February 2009. In 387 months of history, this is only the tenth print at or above 60%. The table atop today’s Feather charts lists the six other instances this Rubicon was crossed: March 1970, March 1974, July 1979, October 1990, September 2001, and June 2008. All but one occurred in recession — July 1979, which was itself just before the early 1980s double-dip.

The second column shows the starting points for initial jobless claims in each of these months, all of which are well north of the 220,000 registered in the week ended March 8^th (Thank you gig jobs for creating 3.5 million of the 7.9 million U.S. private sector jobs generated since December 2021!) The righthand columns illustrate the trajectory of these filings over time. Save for the aftermath of September 2001, all others saw a significant spike in initial claims six to twelve months out. To quantify the magnitude of the gig economy shock absorber, six months after June 2008, claims were up 45.2%; 12 months out, they were 55.6% higher. The upshot: initial claims, which have heretofore remained range-bound, look poised to come unhinged as Uber drivers’, which did not even exist until 2009, paychecks have begun to shrink.

Higher unemployment expectations don’t just flag risk for initial jobless claims, but for consumer spending as well. Pink slip fears will compel households to further tighten their budgets, if such prudent planning is even a luxury afforded. As Dollar General’s CEO warned on his latest earnings call, his customers are even beginning to cut back on essentials spending. We’ve already highlighted the 15-year low in Conference Board Vacation Intentions as a red flag. Standing as corroboration are Delta and United, two airlines that benefitted the most from the post-pandemic travel boom. The former recently announced plans to cut capacity from its summer schedule while the latter said aircraft would be retired early due to softening demand.

Retail Sales look to be the next to correct given both near-term (one-year) and longer-term (five-year) unemployment expectations are historically elevated. On a z-score basis, they printed at 3.01 and 2.45 in March, respectively (orange and green lines). The last time views were simultaneously this dour was in the depths of the Great Recession. In June 2008, one-year and five-year ahead Unemployment Expectations were 2.83 and 0.76 on a z-score basis and Retail Sales were rising at a 2.3% YoY pace. Six months on, Retail Sales were collapsing at a double-digit YoY rate. Clearly, there’s downside from January’s 4.2% YoY print (purple line).

Where, then, does this leave the Fed and policymakers’ “The labor market is solid” narrative that’s hanging on by tattered threads? With near perfect certainty, rates traders are expecting no change to policy this week. Looking six months over the horizon, at which point history tells us initial claims will be rising rapidly, futures contracts are pricing in a Federal funds rate of 4% (fuchsia line). The two bottom right charts pit this against the backdrops of year-ahead unemployment expectations and the share of consumers expecting their incomes to either stay the same or fall. Both make clear that the Fed is far behind the eight ball. We’ll see if they meaningfully alter their guidance in their next dot plot when it’s released Wednesday, or if they keep their blinders on and stick to their current script.

Montana is aptly nicknamed the “Last, Best Place.” Up to now, initial claims have been the last, best place for the Fed to hang its hat. Once those start to climb, there won’t be time for them to meditate or, in Powell’s words, “wait for greater clarity” on what to do next. What’s already clear as day is that markets have not priced in enough rate cuts for 2025.

 and equity vol tended to move together. After COVID, however, the MOVE (red line) and VIX indexes (light blue line) went their separate ways with the former staying elevated after the Federal Reserve started tightening. It’s notable that a realignment is upon us as market closes become less predictable.

The re-inversion in the “academic” 3-month/10-year yield curve at the end of February and into March feeds the economic fear trade. A widening in the BB-BBB credit spread would corroborate rising labor market risks. To that end, yesterday’s 14-basis-point (bps) widening to 97 bps normalized to a +1.6 z-score. A further escalation of business bankruptcies into their typically peak spring season would transmit directly to the corporate default cycle. Forever 21’s announcement that it was on the brink of liquidation in lieu of restructuring after yesterday’s close stands as testament to this microcosm of risk. Rather than closing two-thirds of its locations, as originally hoped, it’s cutting to the chase. That “bad news is bad news” anew is…bad news.

The expression ‘cut to the chase’ was an offspring of the American film industry. Before ‘talkies,’ silent films spectacularly ended in chase sequences preceded by obligatory romantic storylines that tested the patience of movie-goers. What filmgoers wanted was to fast-forward to the exciting scenes! The first reference dates to 1929 in a script direction from Joseph Patrick McEvoy’s adapted novel Hollywood Girl: “Jannings escapes…Cut to the chase.” Back then, it literally referred to a dashing last dash. The figurative use we implore insistently today emerged in the 1940s. The Winnipeg Free Press ran an article in March 1944 about screenwriting that included the following entry: “Miss [Helen] Deutsch has another motto, which had to do with the writing of cinematic drama. It also is on the wall where she can’t miss seeing it, and it says: ‘When in doubt, cut to the chase.’”

In the wake of back-to-back releases of the U.S. consumer price index (CPI) and producer price index (PPI) that underwhelmed nervous market participants by coming in cool and cooler, market participants are apt to ask to cut to the chase and ask: “What does it all mean for the Fed’s preferred inflation measure?” These monthly reflex actions cause sell-side economists to crunch the numbers at lightning speed to generate core PCE price estimates. After the dust settled, expectations congealed around a three-tenths rise come the 28th, with risks things could round up to four-tenths. Initial jobless claims also coming in below consensus likely spurred yesterday’s intra-day sell-off in Treasuries. Even so, by day’s end, yields settled lower across the curve.

At 1.870 million, continuing claims may have completed the month of February a smidge south of the 1.888 million the consensus foresaw. That didn’t stop the monthly average of 1.872 million (purple line) from hitting a level that harkens back to Trade War 1.0. At the opposite end of the job insecurity spectrum sit the gods of insolvency proceedings. Reflective of blistering demand, the PPI for bankruptcy legal services has remained in double digits on a year-over-year (YoY) basis (orange line).

To that end, we must admit to being mystified that S&P Global has delayed its release of February bankruptcy data. Our only guess is that it’s a startlingly big number. Thus far this year, there have been NINE billion-dollar bankruptcies, and 25 bankruptcies of companies with $100 million or more in assets or liabilities. According to ABI, bankruptcies accelerate in March and April. To wit, with a hat tip to long-time QI friend Peter Boockvar, the Wall Street Journal (WSJ) published “Private-Credit Firms Expand Restructuring Teams Amid Bankruptcy Surge.” Now that cuts to the chase.

Thus far in March, our constantly monitored Bloomberg large bankruptcy count ($50 million or more in liabilities) corroborates signs of high demand for restructuring and workout professionals. This month is pacing to a number slightly above 20 (lilac line), which feeds the recession theme. Bankruptcy and layoff cycles go hand in hand. As QI’s Dr. Gates tallied yesterday, February WARN notices hit a nine-month high of 31,854. That certainly is a shoe that fits the narrative’s foot (blue line). The thing is, the 64% advance since December ranks in the top 10% since 2006. Applied to the top 15 states of California, New York, Texas, Illinois, New Jersey, Michigan, Ohio, Florida, Pennsylvania, North Carolina, Washington, Arizona, Missouri, Wisconsin and Nevada, however, and the 88% two-month surge lands in the 96^th percentile (yellow bars).

At the micro level, abrupt increases in large state WARN notices cannot be dismissed out of hand. Ditto for rapid rises in University of Michigan (UMich) Higher Unemployment Expectations. No surprise, synchronous spikes are a bright red flag. For the full month of February, Higher Unemployment Expectations rose to 51%, crossing a Rubicon that’s never failed to accompany recession (green line). Moreover, in the month’s second half, this leading indicator of jobless trends averaged an even more concerning 59% (green marker). While the focus of today’s preliminary March UMich will be on inflation expectations, Higher Unemployment Expectations are the truer tell in judging the depth of recession. A further rise into the 60s from February’s second-half reading would ratify the bankruptcy cycle shifting into higher gear.

The cycle dynamics manifest as volatility. In the post-Great Financial Crisis era, bond and equity vol tended to move together. After COVID, however, the MOVE (red line) and VIX indexes (light blue line) went their separate ways with the former staying elevated after the Federal Reserve started tightening. It’s notable that a realignment is upon us as market closes become less predictable.

The re-inversion in the “academic” 3-month/10-year yield curve at the end of February and into March feeds the economic fear trade. A widening in the BB-BBB credit spread would corroborate rising labor market risks. To that end, yesterday’s 14-basis-point (bps) widening to 97 bps normalized to a +1.6 z-score. A further escalation of business bankruptcies into their typically peak spring season would transmit directly to the corporate default cycle. Forever 21’s announcement that it was on the brink of liquidation in lieu of restructuring after yesterday’s close stands as testament to this microcosm of risk. Rather than closing two-thirds of its locations, as originally hoped, it’s cutting to the chase. That “bad news is bad news” anew is…bad news.