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A Bird's Eye View Blog

Fireside Charts: Current Chances of a Recession, Indices Fail to Reach New Highs, Impact of Tariffs Shows in CPI and PPI

By:BCM Investment Team | Date:May13, 2019 | Category: Equity, Economics, Market Highlights, Fireside Charts

The yield curve model puts the chance of a recession between 25-33%. It is now at its highest since 2008. Only the S&P 500 and the NASDAQ have reached new highs in 2019...every other major U.S. average index has yet to do so. In an update on the trade balance, the total for March was -$50 billion up from February. The CPI report showed us that consumer inflation remains near the Fed's 2% target. How have the tariff increases impacted inflation in the US thus far? They have made an impact, and most clearly in PCE. 

  

1. An update on a possible recession...

Source: Oxford Economics, as of 5/13/19

 

  

2. Interesting...Only the S&P 500 and the NASDAQ have made new highs in 2019...every other major U.S. average has yet to do so, and only 4 of the 11 GICS sectors (Discretionary, Tech, Real Estate and Utilities) have made new highs in 2019.

 

Source: Thechartstore.com, as of 5/13/19

 

 

3. Despite a Dovish policy and a pledge to modify QE reversal this month, QE reversal has put back ~$650 billion of bonds into the market so far...


5.13 chart 3-1
Source: Thechartstore.com, as of 5/13/19

 

  

4. An update on our trade imbalance. The trend is going the wrong way...

 

 

Source: Thechartstore.com, as of 5/13/19

  

 

5. Inflation, as measured by the CPI, remains benign and at the FED's 2% target.


 

 Source: WSJ Daily Shot, as of 5/10/19

  

 

6. The effects of the tariffs have started showing up in the Producer Price Index (PPI)...

Source: WSJ Daily Shot, as of 5/13/19

 

 

7. ...and the CPI...

Source: Department of Labor, Department of Commerce, Goldman, as of 5/13/19

 

 

8. ...and especially in the FED's favorite inflation gauge, the PCE...

Source: Department of Labor, Department of Commerce, Goldman, as of 5/13/19

 

 

9. ~60% of all UST debt has a maturity of 5 years or less.



Source: Thechartstore.com, as of 5/13/19

 

 

10. Was the December increase in UST yields a false breakout?

 

5.13 chart 2

Source: Thechartstore.com, as of 5/13/19

 

 

Are your recessionary fears keeping you up at night? As money managers and analysts, we understand the emotions that come with the current market environment. Read one of our recent Financial Literacy pieces, Investment Losses in Terms of Percentage, Time, and Dollars, to help settle your emotions about the market noise and to help decide what moves to make next.

 

 

 Full Post: Investment Losses

 

Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.