As Bloomberg’s Tracy Alloway noted on Monday, the curve is getting “flat as a pancake,” and that’s not generally a good sign for the economy.

Bloomberg was referencing the latest weekly from Deutsche Bank’s credit team. For those who missed it, we brought you the highlights on Saturday here. According to the bank’s recession indicator (the implied probability based on 3M/10Y spreads), there’s a 60% chance the US is headed for a downturn.

As it turns out, Goldman doesn’t agree.

The bank has a model for just about everything, some of which are more accurate than others, but here’s what the “economic spillovers” indicator spit out when Goldman endeavored to quantify the effect of the UK referendum on a variety of economic variables outside the UK:

(Charts: Goldman)

So essentially, Brexit is meaningless for US GDP both near-term and medium-term and although they’ll be a bit of a disinflationary impulse through H1 2017, it will dissipate over time.

More broadly, Goldman looked at recession probabilities. At the risk of putting you to sleep, here’s the methodology:

“We estimate a so-called ‘probit’ model to explore the drivers of recession risk over these different horizons. Specifically, we regress the above ‘alarm’ indicators on (1) a country-specific ‘dummy’ to capture local average recession risk; (2) macro variables (including growth in year-over-year real GDP per capita and the IMF’s estimate of the output gap); (3) financial indicators (including recent changes in equity prices, house prices, and the exchange rate; and the 5-year change in the credit/GDP ratio); and (4) measures of uncertainty.”

“Exhibit 5 shows the estimated (or conditional) recession risks for Q3, the four quarters starting in Q3, and the eight quarters starting in Q3. We calculate the recession probabilities in the Euro area (EA) and in advanced economy (DM) as the GDP-weighted average of the country probabilities. 11. We compare the estimated risks with the unconditional probabilities of being in recession. For the US economy, for example, the unconditional probability of being in recession is 15% in any given quarter and as high as 34% over any given two years.”

Got that? No? That’s ok. Let’s just skip ahead to the charts:

(Charts: Goldman)

So what you’re looking at there is a country-by-country probability breakdown (left) and the incidence of actual recessions (defined by the NBER) and Goldman’s model probabilities.

The fit is pretty good.

Essentially, the bank says there’s about a 25% chance of a recession occurring sometime between now and Q2 2018. What’s amusing about that is you probably could have asked anyone who knows what the word “recession” means to estimate the probability of a downturn occurring in the next two years and they likely would have given you a similar answer even if they had no knowledge whatsoever about the current state of the economy.

Anyway, now that we have a post-Brexit snapshot of recession probabilities across the developed world, let’s look at what various capital and FX market indicators said about the extent to which the UK vote added stress to the system.

To gauge this, we can look at BofAML’s Global Financial Stress Index (they literally trademarked that, so don’t even think about creating your index and calling it the GFSI). Here’s a look at the subcomponents:

(Chart: BofAML)

Note the components highlighted in red. Let’s zoom in on cross-currency swaps and JPY implied vol. Here’s a snapshot so you can better visualize the stress level:

The increasingly negative swap spreads indicate a worsening dollar funding crunch. The last time Euro swap spreads were this negative, Draghi was giving his “whatever it takes speech.”

So what’s the takeaway? Here’s BofAML to summarize:

“The GFSI Risk Allocator favours being underweight risk assets given the distribution of stresses within the GFSI. Indeed the percentages of Bullish, Bearish and Neutral GFSI components (as used in the Risk Allocator) were 4.3%, 52.2% & 43.5%, respectively as of 24-Jun.”

So all things considered, it might be a good idea to take some off the table after last week. Of course then again, if you’d done that last Monday you’d have missed the boat entirely.

The thing about numbers is that they don’t, generally speaking, lie. But statistics sure do. That’s because numbers are just numbers until humans start tinkering with them. Once the human element is introduced, you can throw objectivity out the window.

Essentially, the concept of residual seasonality allows the US government to double-adjust the data until they get the number they want. It’s especially silly, but then again, so are a lot of the methods used to calculate the economic data that headline scanning algos rely on as ignition switches and carbon based traders depend on to assess the relative health of the economy.

Is the US headed into a recession? We don’t know. And frankly, the permabear peanut gallery doesn’t know either, and neither does Wall Street have any idea. The only people worse at forecasting than weathermen and permabears are economists and it’s not really through any fault of their own. Economics is a pseudo-science that academia has succeeded in transforming into a “real” science in the minds of the public. And that’s too bad.

In some respects, you have to wonder whether the Western models are any better than what the Chinese do (i.e. just call it 6.5-7% growth regardless of what the real number might be). If you need proof of the futility of economic forecasting by “experts” look no further than the IMF, which has a had a particularly difficult time forecasting of late:

(Table, Charts: IMF)

Nevertheless, the market still listens to economists and assigns some weight to their projections so pay attention we must.

One of the amusing things about the research that comes out of the Street these days is that it’s become fashionable to be bearish. Whether that’s because the global economy faces a laundry list of headwinds or whether it’s the usual lemming phenomenon that allows thousands of people to make a quarter of a million dollars a year each to all say the exact same thing is unclear, but whatever the case, there’s a bearish feel to a lot of today’s desk commentary.

Take the latest from Deutsche Bank’s US credit team (who are actually really good) for instance. In their latest weekly, they flag a number of troubling indicators on the way to suggesting that secular stagnation has set in. Here are a few key excerpts:

“Recent data have exhibited symptoms of secular stagnation. Real GDP growth has slowed, raising the risk that the output gap will not close before the onset of the next recession, a nearly unprecedented occurrence in post-WW II history. We also find increasing evidence on a key aspect of secular stagnation theory, the nexus of weak business investment, depressed aggregate demand and low real rates. The secular stagnation hypothesis is gaining ground, and the large downward revisions to the “dot plot” in June suggest that the Fed’s optimism is eroding.”

“The following table summarizes the above analysis. It also highlights that the post-recession data are more concerning if we compare them to past periods of expansion alone instead of considering all of the post- WWII data, which contain a mix of economic expansions and contractions.”

(Chart: Deutsche Bank)

Finally, here’s Deutsche Bank’s recession indicator:

(Chart: Deutsche Bank)

Of course none of the above should be expected to stop investors from pouring more money into the market. After all, US equity ETF shorts are the lowest they’ve ever been and as far the Treasury rally goes, you can expected US paper to continue to be well bid because… well, because if you’re looking for riskless debt, 145 bps looks a lot better yield wise than the negative rates on German and Japanese government bonds.

Do you know who else has a less than sanguine view on the US economy? Bill Gross. “This is the end of globalization as we know it,” he told Fox on Monday, referencing the UK referendum results. The odds of a recession are 50% he added, before predicting the 10Y yield would fall to 125 bps which, incidentally, is exactly where Deutsche Bank sees it heading.

The takeaway for risk assets? Well, if this week is any indication, the takeaway is “see no evil…”

More and more evidence of a recession in 2016 seems to be rearing it's ugly head. Bonds are screaming higher which is a tell tale sign that the market is thinking recession. Meanwhile financials are officially in a bear market. I keep watching the implied volatility in the XLF and that tells you something is lurking beneath the surface of this market. Everything I look at is screaming risk right now.