BLS Employment Report, Recession Watch, Inflation and the Fed


By Victor Sperandeo with the Curmudgeon


Recession Watch:

The U.S. is in a recession according to the age-old definition of two consecutive declining quarters of GDP (unofficially as 2nd quarter GDP has yet to be reported). The NBER will determine when it started, how deep it will be, and when it ends in about nine months after it ends. That is purely for historic purposes and has nothing to do with investing.


There are several other signs of a recession: all time low in consumer confidence with nearly half of respondents saying inflation is eroding their standard of living, super strong U.S. dollar (“flight to safety”) which curtails bank lending, Dr Copper is in a bear market (making a 17-month low on July 1st), retail sales fell 0.3% in May and rose less in April than initially reported, demand for real estate has fallen (due to higher mortgage rates) and construction of new homes has declined, inverted yield curve (2 year yield > 10 year yield) is a classical signal for an imminent recession, M2 growth is slowing to a snail’s pace (see below), VC and angel investments in start-ups have declined to their lowest level since 2019 dropping 23% over the last three months, commodities have reversed and are all now in intermediate term downtrends. There’s more…


If you believe the stock market is a leading economic indicator (it’s a component of the Conference Board’s Leading Economic Index -LEI), take note—it’s down more than 20% in 2022 with all stock sectors except energy showing a YTD decline. Finally, the LEI itself decreased by 0.4% in May 2022 to 118.3 (2016 = 100), following a 0.4% decline in April 2022. The LEI is now down 0.4% over the six-month period from November 2021 to May 2022.


Disclaimer:

I do not trust or use any data from the U.S. government, including agencies (e.g., the BLS, BEA, etc.), affiliates or even the institutions that are potentially influenced by the government’s power. Instead, I do my own deep due diligence for “investment” purposes only. That involves analysis of original source documentation with verification from credible sources.


Curmudgeon Comment:

Economists expect that the CPI for June 2022, to be released on July 13th, will hit a fresh 40+ year high of 8.8%, according to a poll conducted by Reuters. [The monthly core index is forecast to decline to 5.8% from 6.0% in May.] The CPI probably rose nearly 9% in June from a year earlier, based on the median projection of economists in a Bloomberg survey. If those forecasts are correct, count on a 75 bps Fed Funds rate hike at the FOMC meeting on July 27th.

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Quote:

Quote by Sir Josiah Stamp:

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." Said to be from an informal talk at the University of Texas in the 1920s.

 

The statements in this communication are the opinions of its author, Victor Sperandeo, and are not to be relied upon by anyone as the basis for an investment decision. Any investments made by a party in reliance thereon are made at such party’s sole risk. No guarantee of any kind is implied or possible where opinions as to past or future market conditions/events are provided. Past performance is not necessarily indicative of future results.