CHART OF THE DAY: Recession fears appear to be cooling among US companies

• DataTrek Research pointed out that third-quarter earnings calls had fewer mentions of "recession."
• Just 11% percent of management teams mentioned a recession, below the 2020-2022 peaks of 42%-46%.

Our chart of the day comes from DataTrek Research, which notes that mentions of certain economic buzzwords are down on company earnings calls, signaling corporations' feelings about the economy heading into year-end.

As disinflation continues at a steady clip and the labor market shows signs of loosening, corporate America is feeling a little less on edge about the path of the economy.

In a note Monday, DataTrek highlighted that the number of S&P 500 companies mentioning "recession" on earnings calls has been falling all year and hovered at 11% in the third quarter. Though that's at the upper end of the 3%-11% band seen from 2013-2019, it is well below recent peaks of 42%-46% in 2020 and 2022.

At the same time, DataTrek cofounders Nicholas Colas and Jessica Rabe also note that the number of S&P 500 companies mentioning "inflation" ticked lower in the last quarter to hit 55%, down from 2022's peak of 83%.

"Put more bluntly, more than half of all S&P companies still see inflation pressures in their cost structures and are calling this to the attention of Wall Street analysts and investors," in DataTrek's view.

Taken together, the "recession" and "inflation" mentions points to moderating, but still persistent unease among companies.

"Inflation may be something of yesterday's news in capital markets, but not in board rooms," Colas and Rabe said. "Stocks have shrugged off recession fears, but they remain elevated at many companies. This is a recipe for further cost cutting, and we expect unemployment to increase in coming months as a result."

But they also note that the still-elevated mentions of inflation and recession don't necessarily bode poorly for stock performance.

"Managements know the name of the game next year will be margin management, not mindlessly maximizing revenues. As long as the US economy continues to grow into next year, this should allow companies to meet or beat Wall Street analysts' earnings estimates over the next 2 quarters."

Meanwhile, Bloomberg reported recently that history suggests economic optimism tends to peak just before a downturn. The number of news articles mentioning "soft landing" has spiked before past downturns, according to Bloomberg, which noted such a spike in mentions is being seen currently.

Big Wall Street firms are mixed in their outlook for the economy next year. Goldman Sachs maintains a 15% chance of a recession, while JPMorgan strategists have said a downturn seems inevitable.