Regional banks are short of capital. Caught out by rising rates, assets (especially long duration fixed income) fell. Shareholder dilution beckons but equity valuations are low. As banks are forced to compete for deposits with money market funds, Net Interest Margins are declining. Bank runs are a rising risk, in a social media-induced frenzy. The Fed’s focus remains inflation. R** is on our doorstep.

Recent positive surprises in activity data can be attributed to idiosyncratic factors but have dealt the market a misleading hand. To assess where we really are, parsing the leading and lagging indicators of the business cycle can keep us on the straight and narrow. Below a detailed breakdown of those indicators and what they tell us.