Uncertainty Leads to Hiring Stalls, Data Suggests Late Cycle Slowdown, and the Yield Curve Inverts

Meme stocks are back. The labor market remains strong, but fewer firms are planning to hire in the future. Where are we in the business cycle? The data points to a late cycle slowdown, which has historically led to weak stock returns. The yield curve concurs, as the 2-10 Year Treasury spread briefly inverted for the first time since 2019. Yield curve inversions are widely viewed as a harbinger of recessions. The market is now pricing in a 3.25% Federal Funds rate in 2023, see how this compares to past Fed hiking cycles. The tax deadline is right around the corner, if you’re getting a refund how do you plan to use it?  

1. We had hoped to retire the term “meme stock” but unfortunately it will remain in our lexicon for now:

Source: The Daily Shot from 3/29/22

2. Job openings remain near record highs, but it seems the murky economic picture is putting a damper on future hiring plans:

Source: Wells Fargo Securities

Source: The Daily Shot from 3/29/22

3. While the hard economic data remains strong, market prices and sentiment are pointing towards a slowdown or contraction:

Source: KKR Global Institute

4. Neither a slowdown, nor a contraction, have historically been good periods to own equities:

Source: KKR Global Institute

5. An inverted yield curve implies that the Federal Reserve will be able to get inflation under control, likely slowing economic growth in the process:

Source: https://fred.stlouisfed.org/series/T10Y2Y

6. The market expects a relatively aggressive rate hike cycle:

Source: @VPatelFX

7. According to one survey, the majority of consumer tax refunds won’t be flowing back into the economy:  

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