Equities want to rally, and that’s important to note because the biggest piece of information we got from the real economy today was from durable goods and the numbers weren’t good, Ed Harrison told Real Vision during today’s Daily Briefing.

Harrison said that when the data is poor but the market rallies, as it did today, it tells you where the momentum is.

Harrison said he thinks Q4 will see significantly lower performance, both for the economy and individual companies, so momentum may be up right now, but the data is moving in the opposite direction and the tension is building.

Harrison said where we go from here depends a lot on inflation. If inflation is high, asset prices will go up. If disinflation is greater, any economic weakness will send asset prices down. Or, we could get an upside scenario we get a vaccine, productivity growth increases, and you can take multiples even higher from where they are today. Harrison thinks now is the time we’ll start to see a shake out in those three scenarios.

This period is important to how it plays out because of things like the durable goods numbers today, he said, which are representative of the basing effect moving forward. We dipped down, snapped back up, could continue higher—or there could be a phase shift to a more muted upturn or even a rollover into a downturn.

“The fast growth phase is over now,” he said. “A muted recovery is the best we can get.”

Harrison said that he usually looks to the credit cycle as a leading indicator in all of this. When it shows deterioration, you get the canary in the coal mine. Harrison looks at HYG as the place to see if bad things are going to happen because the Fed will backstop corporates, but they won’t be buying up junk bonds en masse.

Harrison said we will see deterioration first through the bankruptcy cycle and that will be the trigger for any sort of move in equities.