It’s hard to say how much the latest price action in markets has been pricing in a soft landing but we got a hint today.

The S&P 500 is down 1.1% and there’s a major bid in global bond markets. USD/JPY is down 141 pips to 135.96.

The tone deteriorated after today’s US services PMI came in at 47.0 compared to 52.6 expected. Aside from the pandemic, it’s the worst reading since 2009.

It argues that demand is falling rapidly and precipitiously after a final pandemic reopening gasp over the summer. Consumers are tightening up due to inflation and uncertainty with businesses doing the same.

Before this, bad US economic news was generally good news for markets because some cooling meant that inflation had peaked and the Fed wouldn’t have to hike as much. Now the market is signaling that the Fed may not get beyond 3% and that a recession — possibly a harsh one — is coming.