Currently, the proba is about 20% according to Morgan Stanley…
Per MS’s report date Feb 20:
« We look at 40 different market and macro indicators, and the likelihood of a 15%+ down move when they sit at current levels. The average likelihood is 19-24%, near the historical average, which we think is higher than many would intuitively expect. »
Key market and macro indicators that raise the proba of a market drawdown include:
« Market measures – oil and real yields are among the assets which flag the highest chance of a big near-term sell-off (~40%) – put differently, large increases in oil and real rates have been more likely to precede drawdown risk.
Macro measures – jobless claims, inflation and loan growth: Periods of low jobless claims, rising CPI and above-average loan growth (we currently have all three) have been more likely to precede 15%+ equity drawdowns. »