Mr. Market’s outlook has turned darker lately. The ongoing slide in stocks and oil, combined with an increase in the spread in junk yields over Treasuries, is creating deeper doubts about the strength of the US economy. The Treasury yield curve is still positively sloped, which implies that growth will survive. But some analysts say that this historically valuable indicator is less reliable these days because of extreme measures with monetary policy in recent years.

The hard data for macro has yet to deliver a knock-out blow and confirm that a new recession has started. But the economic numbers proper are available only through December. Real-time market indicators, on the other hand, are effectively telling us that the yet-to-be published January dataset will look ugly. That’s still a speculative call at this point. For those who take the bait it’s all about trusting Mr. Market’s forecast. In any case, we’re at a precarious point when a markets-based reading of the economic trend is signaling weaker growth or worse but without confirmation in the underlying macro numbers.

The key question is whether we should accept the markets-based projection and assume a new downturn is fate or wait for a genuine signal of recession based on a full set of indicators? For some perspective, let’s catch up on the numbers as they currently stand.

First, here’s a markets-based view of the economic trend. The Macro-Markets Risk Index (MMRI) chart below is based on a probit model that crunches the raw data on the stock market, crude oil, the junk-bond spread and the Treasury yield curve. (For methodology details, see pages 3-4 in the sample copy of the US Business Cycle Risk Report.) Not surprisingly, MMRI’s implied risk that a new NBER-defined recession has started has jumped recently. But while the current probability estimate of roughly 26% (as of Jan. 20) is the highest since the last downturn, it’s still below the 50% threshold that probably marks the point of no return.