ou may not have noticed what with the S&P500 hitting new highs every other day, but the economy has been getting a slow drip of bad news over the past few months.
Here are a few of the charts that I’ve been collecting that paint an ominous picture.
First off, bankruptcy is hitting new highs along with the market. We are hitting a 14-year high in companies going under. Failed companies are the highest since 2010 which was the tail end of a brutal, multiyear, bear market.
And despite Biden’s big spending bill to encourage manufacturing in the U.S., industrial production is contracting, which is a leading indicator of a recession.
People are running out of money. Helen of Troy (HELE), the maker of Revlon and other makeup brands, has seen its stock drop 48% YTD because people aren’t spending on frivolities.
Nor can people use their houses as ATMs like they did in prior recessions.
Mortgage payments are at a 40-year high:
And the Refi Index has flatlined. Few people will trade a 3% note for a 7% note.
And it’s not like stocks are cheap. All the money is in the Magnificant 7 stocks.
However, even the broader market is as expensive as it has ever been.
On top of that, everyone is bullish! The put/call ratio is a contrarian indicator. The last time it was 0.58 was 8/10/15 and SPY dropped 13.42% over the next 10 trading days.
And finally, when the Fed starts in on its rate hiking cycle it inevitably ends in a recession. Over the past few decades, it’s just taken longer to kick in. The Fed started hiking in 2022 and ended in July 2023.
I’m starting to think we could be in for a rough September. You might consider using the rate-cutting hype to increase your cash position. Sitting in a 5% money market fund seems like a good idea. Furthermore, you’ll have some dry power when you need it.
All the best,
Christian DeHaemer
Outsiderclub.com
Good articles:
https://www.outsiderclub.com/the-housing-market-is-broken/
https://www.outsiderclub.com/good-stories-get-better/
https://www.outsiderclub.com/unemployment-rate-has-bottomed/
