Displaying items by tag: bear market

(New York)

The whole market has been on recession watch mode lately. The Fed has gone seriously dovish and weak economic data seems to be emerging by the day. However, some good news, at last: US jobless data just clocked in at the lowest level in 50 years, showing that the labor market is still tight. The numbers were in contrast to economists’ estimates for higher claims. Claims have fallen this far recently, but been revised higher later.

FINSUM: This is good news but it may not be indicative of much as this data could be slightly behind the hiring numbers, which have been weak recently.

(New York)

The economic picture is growing increasingly gloomy for the US. While there has been sporadically good data, the general trend is downward across many areas. Today, more information on the labor market is signaling a further deterioration. ADP hiring data has been released and it shows that sector hiring has fallen to an 18-month low. The private sector hired 129,000 new workers, missing expectations. “The job market is weakening”, says Moody’s Analytics, bluntly.

FINSUM: The job market seems like a good leading indicator right now. Company’s may be tightening purse strings, which could be a sign that everything is slowing.

(New York)

Headline fourth quarter growth got downgraded this week to just 2.2% (from 2.6%). That may not seem like a devastating fall, but if you take a closer look at the figures, they are worse than at first glance. In particular, it becomes clear that growth was actually weakening all throughout 2018 (versus 2017). While the fourth quarter especially showed weakness, it was really only two one-time quirks that kept growth as high as it was for the year: increased military spending and higher spending by non-profits. Neither of those factors are very tied to the underlying economy and consumers.

FINSUM: This is pretty eye-opening and does sap our confidence a bit. Consumer spending also barely rose in January, which is another negative sign.

(New York)

Another day, another round of bad news on the economy. In what comes as another round of disappointing data, GDP for the fourth quarter was just revised downward from 2.6% to 2.2%, showing the economy finished the year on a softer note than expected. The data adds to the list of poor numbers—labor, housing etc—that have been hitting investors.

FINSUM: Weak economic and housing data have been flowing like a hose lately, and today is no different. This will only add to the downward momentum in yields.

(New York)

The professor who first identified yield curve inversions has written an article explaining what the development really means. First identified in 1986, a yield curve inversion is considered the most widely accurate indicator of recession. Since it was first identified and back tested, it has accurately predicted a further 3 out of 3 recessions. This is a point its “discoverer” Campbell Harvey hammers home in his article. He explains that an inversion is usually followed by a recession within 12-18 months. The yield curve has not been inverted since before the Crisis, but just did so on Friday.

FINSUM: One of the important points Harvey makes is that in order for the inversion to really indicate a recession, it needs to remain in place for at least three months. We are only at one day.