Is a Recession and Stockmarket Crash Coming?

There is lots of talk about equities being in a bubble and that a stock-market crash is coming given that unemployment in the US is edging up (though still low) and the Fed is cutting interest rates. From the bullish camp, Anthony Pompliano posted this chart, yesterday:

The number of central banks cutting interest rates usually peaks at stock market bottoms. We look like we are nearing a peak in this variable, but the stock market has been climbing for a couple of years! Based on history, a stock market crash doesn't seem likely, but this is also weird behavior. On the other hand, in 1997-98 the indicator was in positive territory, though falling and the market went sideways, but there is no clearly analogous period. So, I charted the US federal funds rate against the S&P 500 and MSCI World Index total returns indices:

Now, we can find analogies. In 1998, the Fed cut in the wake of the LTCM collapse, but the market went up. Then in late 2019 the Fed started cutting after the yield curve inverted, but the market kept on rising through January 2020, after which the pandemic hit. So, it seems like we are in a similar though longer period. Regarding yield curve inversion, this is where we are:

This shows the difference between the 10 year and 2 year yield. We are in a normal positive yield curve. If the previous yield curve inversion predicted a recession, we should already be in it. On the other hand, maturities shorter than 1 year are higher than the two year yield:

Note that in 1998, the yield curve briefly inverted and then went positive again. It was back into the negative in February 2000. Going negative again now would be a bad sign.

I previously posted that 2025 felt like 1997. Maybe it's 1998. In either case, the base case scenario is that the market will likely rise for a while longer.