Intrade indicates a 55% chance of recession in 2008

Trading on the Intrade Prediction Market indicates a 55% chance (up from 47% last week) of a U.S. recession in 2008.

In other words, people are quite worried that a recession is possible and consider it (just barely) likely, but without very much conviction.

Personally, I would still put the chances down around 25% (1 in 4.) The ISM Non-Manufacturing report on Friday was still too strong to indicate an imminent recession and the rising employment component in the ISM report effectively counters the weakness of the December employment report. And, we simply are not seeing any dramatic rise in weekly unemployment insurance claims.

Nonetheless, the Intrade indication is probably a good proxy for overall market sentiment.

OTOH, if I were to try to synthesize the chance of recession from the overall tone of commentary, it would be about a 99% chance of recession in 2008. In other words, much of the commentary that attracts the interest of the press grossly misleads people about what the actual data suggests.

-- Jack Krupansky