As the markets launch into 2023 with an upward moment, a new analysis from Wall Street firm JPMorgan offers a bullish outlook for the year, concluding that a soft landing could be the most likely outcome.

What Happened: Seven of nine asset classes ranging from high-grade bonds to European stocks now show less than a 50% chance of a recession, JPMorgan's trading model shows, according to Bloomberg.

This marks a significant improvement from October 2022, when the firm said a recession was almost a done deal.

That said, global money managers were of the view the economy is not out of the woods yet, the report said, adding that the S&P 500 Index is still assigning a 73% probability of a recession materializing. On a positive note, the recession odds baked in by the stock market have improved from 98% in 2022.

The asset classes that have now discounted a less than 50% chance of a recession are:

• U.S. high-grade credit

• U.S. high-yield credit

• Five-year treasuries

• European stock market index

• European Union high-grade credit

• European Union high-yield credit

• Five-year European Union government bonds

Apart from the S&P 500, only base metals are reflecting recession odds over 50%.

Most asset classes have been steadily pricing out recession risks helped by China reopening, the collapse of gas prices in Europe and larger than expected inflation downshifting in the US," JPMorgan strategist Nikolaos Panigirtzoglou reportedly said.

Opinions Diverge: JPMorgan's Marko Kolanovic, meanwhile, said investors are underpricing the potential pressure on stocks stemming from the growth slowdown in the months ahead, Bloomberg said.

The consensus forecast of economists has put the odds of a recession at 65%, up from 50% in October, the report added. It also said the Treasury yield inversion continues to flash a recession warning, noting that the yield on the three-month bills is more than that of the 10-year Treasury note.

The recent bounce in the market reflects investor expectations that the central banks will be able to bring about a soft landing, the report added.