QUOTE OF THE WEEK
“Sometimes we have to soak ourselves in the tears and fears of the past to water our future gardens.” – Suy Kassem
TECH CORNER
We just go the report that Headline Inflation came in a bit lower than expected in April. The stock markets reacted today in what I consider a way to positive manner. We are still a long way from meeting the Fed’s target of 2% so that they can declare “mission accomplished”.
Despite today’s moderately good news, it looks clear that the progress against inflation made from mid-2022 to mid-2023 has stalled. Consumer prices were up 9.1% in the year ending in June of 2022 so we have come a long way. The rapid drop down to 3.0% in the year ending in June 2023 made many believe that the end of the “transitory” pandemic inflation problems was in sight. Since then, baseline inflation has remained “sticky” above 3%. This “sticky” inflation is casting doubts on the Fed cutting rates enough, or at all, this year to make a difference. Even if we get the hoped for cut of 50 basis points this year down to 4.75% it isn’t going to help the economy avoid a recession.
The first of the two factors that signal a recession is starting to show some cracks. The unemployment numbers are starting to creep up. Long-term unemployed numbers (more than six months) are now at a level last seen during the Great Recession of 2008-2009. The employment service “Indeed.com” is reporting a stark drop in the number of new job openings. Definitely a leading indicator for a recession.
The other factor to indicate a recession is credit spreads. So far they has not increased. Just to remind you, we use both fundamental research and technical research. From a fundamental perspective, baring a drastic change in economic conditions is still pointing towards a recession. However, from a technical standpoint, the stock market may have a little more to run up so we are taking a small position in an S&P 500 exchange traded fund (ETF) The fund is structured with downside protection
