May 23, 2022

Slipping Into Recesson?

There was an old television program called Star Trek. In one of the shows, some members of the crew were accelerated to unimagined speed.

Darting around the ship so fast, that they could not be seen by the rest of the crew. While those who were left behind appeared to be statues, not moving at all. From the point of view of the speeders.

That's a perfect description of Wall Street.

On the one hand, we have tradersZipping around buying and selling stocks, reading indicators that the rest of the investment world just doesn't comprehend.

Even more, we have high-frequency traders, who literally move at nearly the speed of light.

While on the other side we have many government agencies and NGOs who provide the economic data that the rest of us use to determine the current state of the economy.

People like the National Bureau of Economic Research. The official arbiter of Recessions in this country. It's the NBER, which makes the call: recessions or no recession.

The fastest I've ever seen the NBER move was for the latest recession. The economic lock-down that occurred in that dreadful second quarter of 2020. Six months after the event, NBER finally called it a recession. The only 2-month recession in history. And, at half a year after the fact, the fastest call ever by the NBER.

So they're obviously the slow part of our "Star Trek Crew." Moving ever so slowly.

On the other hand, on Wall Street, the “Fast Crew” is already reaching a conclusion on our current economy. That the latest Recession is nearly here.

The first thing they see is the recent performance of the Stock Market. You don't get a two-month 25% correction in NASDAQ, and the worst two-month performance by the Dow in 99 years. Without there being something seriously wrong with our economy.

Most significantly, the worst performers are the very stocks that have been leading this market throughout the past 14 years. The FANGS Stocks: Apple, Amazon, Alphabet-Google, Netflix, Facebook, and Microsoft. The very high-tech giants that have been an integral part of our economic growth for a generation.

Of course, we can't leave the retailers out of this growing gloom. Both Target and Walmart stocks plunged on their dire out-look for consumer spending at their stores. As we all know the consumer represents nearly 2/3rds of the economic activity in the nation.

Then there's housing. Throughout this wobbly economy, it's been housing that is the most solid. For many see housing as the best hedge against inflation. Housing is coming off one of its best years ever.

But all that may be changing. With higher mortgage rates come fewer buyers. Both Jerry Konter, head of the National Association of Home Builders, and Doug Duncan, chief economist at Fannie Mae, see housing slowing in the weeks ahead. In fact, Duncan is now outright calling for a recession in housing.

Add all this up, and you have a pretty good case for a general recession beginning right about now.

This is probably not news to you, my reader. It's something that you've seen for weeks now.

The higher prices for food and gas. The empty shelves, and hard to get items. The continued squeeze on your monthly income. Less discretion spending, more spending on high-priced necessities.

You've no doubt been watching all this unfold in your own household. Wall Street is right behind you, with those Government economists weeks behind still.

But eventually, they'll be telling you something you already know:

Yes, we are slipping into a Recession.

 

Today:

 

Well, Wall Street is hoping for a much better week than we had last week.

With a couple of hours to go before today's opening, everything looks green currently. Stock futures, metals, cryptos, and most commodities are trading higher in the pre-market.

About the only red ink on the board is over in the bond market.

There is a lot going on this week. As everyone has settled in over at Davos, Switzerland for the annual confab of the World Economic Forum.

Always a fun event, headed by their laugh-a-minute director, Klaus Schwab. The originator of that popular dictum: "You will own nothing and be happy..."

What a guy.

Want to find out the reasoning behind the recent Fed Interest Rate Hike?

Well, we will get some of the answers on Wednesday, when the Fed releases its minutes from the meeting which elected to raise rates to the current level of 1%.

Should provide some interesting reading.

In about an hour, the Chicago Branch of the Federal Reserve will release its National Activity Index.

Released monthly this is an overall gauge of both activity and inflation pressure in the economy. With values above zero, like we are now, indicates that both activity and inflation pressure are above trend.

However, this Index has been trending lower for the past 3 months. And this is a principal reason that many on the Street see much lower inflation ahead.

In earnings today, all eyes will be focused on three retailers: Upscale department store Nordstrom, coffee shop Starbucks and used car dealer America's Car-Mart.

Although in wildly different segments, there is a lot of concern about how the Consumer is faring right about now.

The Street is looking for any indication of the average American's spending.

Have a Great Day!

David