Confirmation That The Economy Is Slowing
QUOTE OF THE WEEK “Hard times don’t create heroes. It is during the hard times when the ‘hero’ within us is revealed.”– Bob Riley TECH CORNER Last week the Debt Ceiling Extension passed with 63 yes votes and 36 no votes in the Senate and 314 yes votes and 117 no votes in the House. It should have passed unanimously in both houses due to the unbelievable damage it would cause if not passed. I understand that certain members of the House and Senate on both the left and right needed to cater to their respective bases with a no vote. The betting is that it looks like the Fed is going to pause raising interest rates when they meet on June 13 & 14. There are already signs that this may be the last raise in interest rates because unemployment is starting to rise. Jobless claims totaled 262,000 for the week ending June 3rd. The total was well ahead of Dow Jones estimate of 235,000 and was the highest weekly rate since Oct. 30, 2021. A total of 1,635 million people were receiving jobless benefits through May 20th, up from 1,283 million from a year ago. It is important to understand that rising unemployment is a “lagging indicator” as to the direction of the economy. It is more than anything a confirmation that the economy is slowing which is exactly what the Fed wants to see. If all this is true, the Fed should stop raising interest rates which is a signal that long term interest rates should start to decline which is exactly the signal to invest into the bond market. It is also important to understand that all the “leading indicators” have been in decline for months. The groundwork has been laid signaling a coming recession. It now appears that the recession could be pretty deep. So, if you are considering jumping into the stock market, the risk is high and the rewards are limited. Please remember that the big stock market crashes since 2000 have all happened during recessions. The data says we are in the “eminent recession” phase, but we are really close to entering the recession. All of the data we follow suggests now is the time to enter the U.S. Treasury bond market. Last we allocated the Cambridge accounts to U.S. Treasuries of multiple durations from 1-3 years up to 30 years to diversify the risk. Remember when interest rates fall, bond prices go up. All the annuity contracts are currently allocated to moderate duration quality bonds. Sources: Department of Labor 5734526.1
