The recession debate remains front page news, bolstered mainly by the yield curve inversion of approximately -100 basis points between the 2yr and 10yr Treasury notes. Inverted yield curves have existed prior to every recession dating back to the 1950’s. So-called “no landing” advocates, meanwhile, point to Q2’s initial GDP read showing a better-than-expected +2.4% annualized rate of growth, along with the historically low level of unemployment here in the U.S., currently hovering around 3.6%. Only time, and the National Bureau of Economic Research, will tell if and when a recession has occurred.
Meanwhile, despite arguments that today’s low unemployment should forestall a decline in economic growth, history shows that U.S. recessions are typically preceded by very low unemployment figures. In the 1954 recession, unemployment surged from 2.6% to 6.0% in roughly one year’s time. In 1969, the jobless rate rose from just 3.5% to over 6.0% by 1971. The current U.S. JOLTS (Job Openings and Labor Turnover Survey) data for June showed a very robust 9.6 million job openings, high by historical measures. Conflicting signals remain prevalent across the economic landscape and for that reason, we remain neutral on the prospects for a near-term recession.
Inflation is still widespread in the economy, despite 525 basis points of interest rate hikes by the Federal Reserve. The PCE Core Deflator edged up +0.2% in June, or +4.1% YoY. Consumer prices ticked up +0.2% MoM as well, while PPI rose a mere +0.1%. This equates to +3.0% YoY for CPI and just +0.1% YoY for PPI. Back to the labor front, Average Hourly Earnings rose a higher than anticipated +0.4% in June, and remain up +4.4% YoY. It’s likely on the Fed’s radar as a sign of labor market strength, and will undoubtedly be monitored going forward as a measure of potential cooling off in the hiring space.
After taking a pause at their June meeting, the Federal Open Market Committee raised short-term rates by 25 bps in July. With no August meeting scheduled (although the Fed will be meeting in Jackson Hole, which has historically led to some economic volatility), the market is currently neutral on the odds for a September hike. Data dependent, as always, Fed Chair Powell will no doubt be monitoring the labor market closely, while also taking into consideration the broader price level here in the U.S. Markets are anticipating the Fed is at or near the end of its current hiking cycle, and if that were not the case, we will likely see much higher market volatility ahead.
To read further about domestic and international equity, fixed-income, and alternative investments, please open the full paper below:
Nottingham Advisors offers both institutional and individual clients experience, sophistication, and professionalism when helping them achieve their goals. With over 40 years of serving Western New York and clients in more than 30 states, Nottingham tailors each solution to fit the specific needs of each client.
For more information about Nottingham’s offerings, visit www.nottinghamadv.flywheelstaging.com or call 716-633-3800.
Nottingham Advisors, LLC (“Nottingham”) is an SEC registered investment adviser located in Amherst, New York. Registration does not imply a certain level of skill or training. Nottingham and its representatives are in compliance with the current registration and notice filing requirements imposed upon SEC registered investment advisers by those states in which Nottingham maintains clients. Nottingham may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. For information pertaining to the registration status of Nottingham, please contact Nottingham or refer to the Investment Advisor Public Disclosure Website (www.adviserinfo.sec.gov). Any subsequent, direct communication by Nottingham with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
This newsletter is limited to the dissemination of general information pertaining to Nottingham’s investment advisory services. As such nothing herein should be construed as the provision of personalized investment advice. The information contained herein is based upon certain assumptions, theories and principles that do not completely or accurately reflect your specific circumstances. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Adhering to the assumptions, theories and principles serving the basis for the information contained herein should not be interpreted to provide a guarantee of future performance or a guarantee of achieving overall financial objectives. As investment returns, inflation, taxes and other economic conditions vary, your actual results may vary significantly. Furthermore, this newsletter contains certain forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates. As such, there is no guarantee that the views and opinions expressed in this article will come to pass. This newsletter should not be construed to limit or otherwise restrict Nottingham’s investment decisions.
This newsletter contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Some portions of this newsletter include the use of charts or graphs. These are intended as visual aids only, and in no way should any client or prospective client interpret these visual aids as a method by which investment decisions should be made. We have provided performance results of certain market indices for illustrative purposes only as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any benchmark index. A description of each index is available from us upon request.
Investing in the stock market involves gains and losses and may not be suitable for all investors. Past performance is no guarantee of future results.
For additional information about Nottingham, including fees and services, send for our Disclosure Brochure, Part 2A or Wrap Brochure, Part 2A Appendix 1 of our Form ADV using the contact information herein.
