A subtle shift in the US economy changed the whole story for markets

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U.S. Economy Remains a Safe Haven, Here's Why

The beginning of 2016 saw markets in turmoil.

And the primary concern seemed to be the health of the world's largest economy: the US.

But over the last few weeks, the data coming out of the US economy has made clear that while things might not be great, we appear to almost certainly not be heading for imminent recession.

(We'd note that the calls for recession shifted from, "We're heading into a recession" to "We're already in recession" as the data started to turn against the economic bears.)

And with signs the economy is not rolling over, markets have settled down considerably.

In a note to clients on Sunday, Don Rissmiller at Strategas Research Partners captured this shift in markets and the data that has brought us seemingly calmer waters.

Rissmiller writes (emphasis ours):

The case that the U.S. is in an economic recession is fading, with continued growth in payroll employment in Feb. True, the BLS jobs report was not universally good. But, so far, there hasn't been the contagion from financial strain that would link Wall St and Main St. in a negative feedback loop. That doesn't mean risk assets have a clear path forward from here. But of the 3 major sources of uncertainty: oil, China & the Fed, there isn't a lot of new worry now.

A better characterization of the U.S. economic data today is that it has gone from "mixed to bad" to "mixed to good." That's a subtle change, but markets care about the second derivative. Investors may be cautious in what they pay for slowing earnings growth. But stable-to-accelerating numbers are a different story.

That's the whole thing: "mixed to good" from "mixed to bad."

It wasn't that investors needed to know we'd see a huge uptick in US or global economic growth, but simply have their fears about another recession — or worse — allayed. And that's what we got.

And so as a US recession has become a more remote possibility, markets have begun perking back up with US and global stocks rallying about 5% over the last month.

Meanwhile US Treasury yields have started backing up again after a rally to start the year was bolstered by the market's belief the Federal Reserve would be paralyzed on policy this year.

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RELATED: Photos from when the Federal Reserve raised key interest rates for first time since 2006

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Federal Reserve raises key interest rates for first time since 2006, Janet Yellen, markets react
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A subtle shift in the US economy changed the whole story for markets
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react after it was announced that they Federal Reserve would increase interest rates December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react after it was announced that they Federal Reserve would increase interest rates December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
Traders work as Janet Yellen, chair of the U.S. Federal Reserve, is seen speaking on a television screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Dec. 16, 2015. The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be 'gradual' and in line with previous projections. Photographer: Michael Nagle/Bloomberg via Getty Images
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
Pedestrians walk past the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Dec. 16, 2015. The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be 'gradual' and in line with previous projections. Photographer: Michael Nagle/Bloomberg via Getty Images
WASHINGTON, USA - DECEMBER 16: Federal Reserve Chairwoman Janet Yellen holds a news conference after the Federal Reserve made the announcement that it was raising its interest rate in Washington, USA on December 16, 2015. The raising of rates a quarter point comes seven years after they dropped the rates to near zero during the financial crisis. (Photo by Samuel Corum/Anadolu Agency/Getty Images)
Janet Yellen, chair of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., U.S., on Wednesday, Dec. 16, 2015. The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be gradual and in line with previous projections. Photographer: Andrew Harrer/Bloomberg via Getty Images
Federal Reserve Chair Janet Yellen speaks during a press conference following the announcement of an historic rate increase, the first since 2006, in Washington, DC, December 16, 2015. The Federal Reserve announced Wednesday its first interest rate increase in more than nine years in a landmark move signaling the US has finally moved beyond the 2008 crisis. The Fed raised the benchmark federal funds rate, locked near zero since the Great Recession, by a quarter point to 0.25-0.50 percent, saying the economy is growing at a moderate pace and should accelerate next year. AFP PHOTO / SAUL LOEB / AFP / SAUL LOEB (Photo credit should read SAUL LOEB/AFP/Getty Images)
WASHINGTON, DC - DECEMBER 16: Federal Reserve Bank Chair Janet Yellen holds a news conference where she announced that the Fed will raise its benchmark interest rate for the first time since 2008 at the bank's Wilson Conference Center December 16, 2015 in Washington, DC. With unemployment at 5-percent and the economy showing signs of strength, the Fed raised the interest rate a quarter of a percentage point and many experts believe the interest rate on short-term loans could go as high as one percent by the end of 2016. (Photo by Chip Somodevilla/Getty Images)
NEW YORK, NY - DECEMBER 16: A trader works on the floor of the New York Stock Exchange (NYSE) following an announcement that the Federal Reserve will raise interest rates for the first time in nearly a decade on December 16, 2015 in New York, United States. The Fed approved a quarter-point increase in its target funds rate. The new target will go from 0 percent to 0.25 percent. (Photo by Spencer Platt/Getty Images)
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Dec. 16, 2015. The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be 'gradual' and in line with previous projections. Photographer: Michael Nagle/Bloomberg via Getty Images
CHICAGO, IL - DECEMBER 16 : A trader in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) yawns as he reacts to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Dec. 16, 2015. The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be 'gradual' and in line with previous projections. Photographer: Michael Nagle/Bloomberg via Getty Images
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
CHICAGO, IL - DECEMBER 16 : Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react to the Federal Reserves interest rate hike December 16, 2015 in Chicago, Illinois. The Federal Reserves raised the interest rates for the first time since 2006 by 0.25 percentage points. (Photo by Joshua Lott/Getty Images)
NEW YORK, NY - DECEMBER 16: Traders work on the floor of the New York Stock Exchange (NYSE) following an announcement that the Federal Reserve will raise interest rates for the first time in nearly a decade on December 16, 2015 in New York, United States. The Fed approved a quarter-point increase in its target funds rate. The new target will go from 0 percent to 0.25 percent. (Photo by Spencer Platt/Getty Images)
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