To The Moon

Food for thoughts. Are you concerned that US economy might turn recessionary ? It was “sort of” a wake up call last, last week when the US non-farm payroll report for July 2024 was released. In just one day, all the weeks of positive gains, evaporated into thin air. Since then, it has been “bugging” me at the back of my mind. To get a “better” perspective of things, I have been reading. Below is a post that I feel is balanced and would like to share it here. Enjoy ! Last last week’s July jobs report led some economists and investors to worry that recession is on its way. The numbers included an increase of 114,000 in non-farm payrolls during July, down from 179,000 in June and far below analysts’ forecast of a 175,000 gain. And the unemployment rate rose to 4.3%, the highest level since October 2021. Afterward, J.P. Morgan economists raised their odds for an economic contraction by year-end to 35%, from 25% previously. July’s jobless rate triggered the Sahm rule for recession (created by former Fed economist Claudia Sahm). What is Sahm’s rule? The rule states that the economy is in early stages of recession when the 3-month average unemployment rate rises by 0.5% points above the 12-month low for the three-month average. That’s exactly what happened in July 2024. Sahm, Chief economist at New Century Advisors now, does not see a recession as having begun - however, strangely enough. Why recession hasn’t started? According to Sahm (who told The Wall Street Journal) — The increased labor pool since the pandemic, stemming largely from a surge in immigration, has led official numbers to overstate the job market’s weakness. What she is concerned about though are (a) the increase in the unemployment rate and (b) slowdown in job growth. “The risk of a recession is elevated,” she wrote on Bloomberg. “Experts’” Views. (1) Ned Davis. Ned Davis Research, Chief economist, Alejandra Grindal —does not see the economy in danger of recession in the near term. He wrote in a commentary - other labor market measures, and most broad measures of the economy, while showing signs of slowing, are not jibing with the Sahm rule’s recession signal. The insured jobless rate has never been this low, nor has the number of job openings/unemployed been this high when recessions have started. The insured unemployment rate is the percentage of the labor force covered by unemployment insurance that is currently receiving it. The rate registered 1.2% for the week ending 27 July. The number of unemployed people per job opening was 0.8 in June 2024. He further added, it’s “extremely uncommon to see equities rise in the months leading into the Sahm Rule trigger, and never by the amount we’ve observed in this cycle. The $S&P 500(.SPX)$ closed at a record high on 16 Jul 2024 and has jumped 19.59% over the last 12 months. (2) $Bank of America(BAC)$ Bank of America, Chief Investment Strategist, Michael Hartnett believed several financial-market readings point away from recession. Wall Street thinks the economy will have a "soft landing" and key numbers have not changed to disprove that. The 30-year Treasury bond yield needs to hit 4% to change this idea. It's currently at 4.23% (as of Aug 9, 2024). The S&P 500 needs to drop to 5,050 to signal a "hard landing". It's at 5,344.16 now (as of Aug 9, 2024). Hartnett further added that it is also important that (a) the $Philadelphia Semiconductor Index(SOX)$ and (b) $Technology Select Sector SPDR Fund(XLK)$ are holding above their 200-day moving averages. As of Fri, 09 Aug 2024, SOX ended at 4,709.45 vs the 200-day moving average of 4,600. XLK closed at 205.63 vs the 200-day moving average of 200. In the event the 2 levels break, stock traders should target the market’s 2021 highs, Hartnett said. For S&P 500 index on 29 Dec 2021 and that would be the 4,793 as support level. This would be about -11.50% below Friday’s close. *Note : remember to make a note of the S&P 500 index support level, important ! My Viewpoints: (mine only) On the run up to November 2024 election, I think every agency and govt department, will try their “best” to keep US economy in “tip top” conditions. Even the Fed is likely to make its first interest cut in September 2024, the debate filtering through now is will it be (a) a conservative -0.25% or (b) market appropriate -0.50% cut. I think the analysts are “correct “technically, because their assessments were based off official data. However, that is just one of many dimensions, to determine US economy status. US National Debt. However, if we look at US Debt clock, it is “worrying”. It has crossed the $35 trillion mark and is continuing skywards, without any signs of slowing down. This is irresponsible financial management by all US presidents that came after Bill Clinton, for he has supposedly reduced the books’ balanced when he left the oval office on 21 Jan 2001. ** Did you know that the US government pays about $868 billion in interest for its $35 trillion national debt ? It is not sustainable in the long run ! US Economy vs Investment Strategy. The million-dollar question — should US economy slips into recession - what should individual investors like us do immediately? Suggestions. (1) Assess Financial Situation: Review your (i) emergency fund, (ii) debt levels, and (iii) overall financial health. Ensure there’s sufficient cash reserves to cover living expenses for at least 3 to 6 months. Why is this necessary ? (1a) It is because there is a co-relation between a country’s economic health and its national debt. Recessions lead to lower tax revenue and increased government spending on social programs (like unemployment benefits), that can contribute to a larger deficit and faster growth of the national debt. (1b) There is also a co-relationship between a country’s economic health and retrenchment (jobs). Companies often reduce their workforce to cut costs, when there is a fall in demand, leading to economic activity slow down. (2) Rebalance Our Portfolio: If your portfolio is heavily invested in equities, consider rebalancing to reduce risk (Meaning - Sell!). Allocate more to defensive assets like bonds, cash, and gold. (3) Avoid Panic Selling: Emotional decisions often lead to poor investment outcomes. Stick to your long-term investment plan unless there's a significant change in your financial circumstances. Even if US economy does not impact Sgp investors, it will impact our investments - US stocks’ value. It is imperative to know exactly what stocks to sell (pronto !) should the US economy turns South. Must Read: Click on below titles to access. Give a like & help to repost ok. Thanks. Buy The 6 Stocks Like Rep. Politician Greene ? LUMN an AI Rocket or next Super Micro $SMCI ? Jobless Claims : Will History Repeats Itself ? Do you think it makes sense to “sell” when signs of recession are obvious ? Do you think it is wise to invest (only) money you can afford to lose especially in an economic downturn ? If you find this post interesting, give it wings! ️ Repost and share the insights ? Do consider “Follow me” and get firsthand read of my daily new post. Thank you. @Daily_Discussion @TigerPM @TigerStars @Tiger_SG @TigerEvents