Is the U.S. economy currently in a recession? The National Bureau of Economic Research isn’t officially calling this a recession, but after two consecutive quarters of declining GDP, Berkshire Money Management Founder and CEO Allen Harris is convinced that what we’ve been experiencing in 2022 is, in fact, a recession. And as the Federal Reserve’s continued efforts to combat inflation begin to create “deep, deep pain,” the recession will only grow in 2023. TRANSCRIPT: Well there’s opinions, there’s facts, there’s data, and there’s anecdotes. So a fact, and I’m not going to get all wonky on this, promise,…
Insights & Advice
Tag: GDP
When will the stock market bottom?
On May 22, 2022, the stock market will bottom after declining 15.1 percent from its high. Or, maybe the bottom is already behind us after the decline of the S&P 500 stock market index cracked double digits during intraday trading. A completed correction looks similar to the start of a new bear market. The problem with guessing when the stock market will bottom is that fundamentals don’t come into play. When selling picks up momentum, many investors don’t raise cash because they calculated a valuation adjustment. Many investors sell declining stocks because it hurts them, which I totally understand. I…
No-shows threaten economy
Last week, economists calculated that almost 5 million workers failed to show up at their jobs. Given the present upsurge in cases of the Omnicom variant, that should come as no surprise. However it clearly has Wall Street economists reducing their estimates of first quarter 2022 GDP. Slower economic growth normally has a negative impact on everything from the stock and bond markets, interest rates and employment. How this will ultimately affect the economy in the months ahead is a question worrying every trader and portfolio manager in the financial markets. The first warning sign that this wave of coronavirus…
The Back-to-Normal Index
“Everything was perfectly healthy and normal here in Denial Land.” —Jim Butcher, “Cold Days” A friend of mine recently came back from a two-and-a-half-week work tour of Europe, where she was trying to raise funds for her private equity fund. I compared her report to my recent two-day trip to New York City (I love New York, but let’s face it – her life is much cooler than mine). In Europe, masks are practically a thing of the past. You go and do what you want, when you want. In NYC, you must show proof of vaccination to get into entertainment…
Dropping out of emerging markets
When I make trades in my investment portfolios, I like to keep you informed. Not that you should do what I do. I mean, what I do in my portfolio or portfolios of clients may not represent your objectives. But you can use it as a guideline for what you are trying to accomplish. On Friday, October 8, 2021, I sold our position in the Innovator exchange-traded fund (ETF) MSCI Emerging Markets Power Buffer (symbol: EJAN). EJAN is a hedged investment that tracks the performance of Emerging Market stocks (EM). We also sold various non-hedged EM positions, which, aggregately, were…
New taxes to know about
Tax proposals from as recently as June 2021 have changed. The stuff that could fall under this topic has filled months and months of news coverage. Today I will focus on some interesting ones you should be aware of. I’ll keep it brief, just so that you know we’re monitoring it for you. The ABCs of ETFs When relevant, I use this column to tell you the trades I made in my portfolios. Readers know that I primarily use exchange-traded funds (ETFs). I use ETFs for a few reasons. ETFs are usually “passive” investments that track indices. If you look at the…
Are mandatory vaccinations legal?
Gross Domestic Product (GDP) is the broadest measure of economic growth. The U.S. GDP grew 6.4% in the previous quarter. By any standards, that’s a remarkable growth rate. GDP for this quarter has dropped precipitously to a forecasted rate of 3.7%. At the start of the quarter, there were growth expectations of 6.5% from Oxford Economics and Morgan Stanley. Typically, a 3.7% growth rate would be considered exceptional. However, measuring a $21 trillion economy is complicated and includes some mathematical estimates. I won’t run us through the calculation, but here’s the gist of it: the demand had been so significant that…
Markets enter the danger zone
It has been a bumpy week for stocks, and it could get worse if you believe the headlines of the financial press. The issue I see is that just about everyone is expecting a nasty period ahead for equities. That makes me somewhat bullish. Calling short-term market moves in this environment is akin to fortune-telling. It is short on analysis, and long on my gut feelings. Granted, I too, have been warning folks that the September-October 2021 time period has been a seasonally difficult time for equities. My column last week addressed the possibility of a 5-10% correction, and what…
Economy grows less than expected
The good news first. The economy grew by 6.5% in the second quarter, which was one of the best quarters in recent memory. The bad news: it was a big miss. Economists were expecting an 8.4% rise, but the markets took it in stride. One explanation is that investors are well aware that the macroeconomic data is, at best, somewhat unreliable and prone to large revisions. It is not the government’s fault. The pandemic and subsequent reopening of the economy has made gathering economic data difficult. Another reason investors gave the miss a pass is that consumer spending, the biggest…
More people expecting a correction
“Oh, there’s my phone … What’s that? Then SELL, SELL SELL. They’re all selling? Then BUY, BUY, BUY!”—Al Czervik I fancy myself a contrarian investor. Famed investor Warren Buffett would advise a contrarian investor to “be fearful when others are greedy. Be greedy when others are fearful.” Today, I am a conflicted contrarian. There is a lot of optimism around the stock market. Per the contrarian textbook (if there were such a thing), I should be reducing a lot of my equity allocation. But I’m not doing so in a significant way. Yet. It’s always hard to pull the proverbial…
Pay up
Weekly pay is up 3.9 percent from March 2020 to March 2021, according to the Bureau of Labor Statistics. That may not sound like much. However, before the pandemic, growth rates had ranged from -0.8 percent to 2.9 percent, dating back to January 2011. From January 2011 to March 2020, there were 20 occurrences of zero or negative weekly earnings growth. In contrast, there were only seven occurrences that exceeded 2 percent. Year-over-year growth of weekly earnings since April 2020 has been stellar, averaging 5.1 percent. It’s not uncommon for average wages to grow higher during recessions. Sounds crazy, right? When…
CAPITAL IDEAS: With stimulus coming, hope for ending the ‘she-cession’
According to McKinsey & Co., women have accounted for 54 percent of COVID-19-related job losses, despite making up only 39 percent of global employment. It’s being called a “she-cession.” In the U.S., working mothers have had to endure balancing work and childcare. The same is true for many fathers. However, the responsibility of childcare and remote schooling has mostly been that of mothers, according to U.S. Census real-time, time-use studies. According to the Labor Department, by the end of 2019, women’s gains in the U.S. workforce pushed the number of female workers higher than males. In particular, the growth of women’s…
CAPITAL IDEAS: Do you have excess savings?
The U.S. Gross Domestic Product (GDP) has almost recovered from its pandemic loss. According to JP Morgan, the last GDP calculation was merely 1.3 percent less than its February 2020 peak. According to the Atlanta Fed’s GDPNow forecast, the U.S. economy will surpass its pre-COVID-19 peak this quarter. With the caveat that we’re only about two-thirds of the way through and anything can happen in a month (remember March 2020?), the Atlanta Fed’s model currently forecasts a 9.6 percent growth rate of GDP for the first quarter of 2021. Unfortunately, that sounds better than it is. The official unemployment rate of 6.3…
Is the stock market in a bubble?
According to a recent E-Trade survey, millionaire investors believe the U.S. stock market is in a bubble (or at least near one). The survey results from investors with at least $1 million of investable assets were: 16 percent say the stock market is “fully in a bubble” 46 percent say it is “somewhat of a bubble” 29 percent say the market is “approaching” a bubble 9 percent say it is “nowhere near” a bubble More than half of the millionaire-class believe the U.S. stock market is at least in “somewhat of a bubble.” They may be right, just accidentally, but are they…