Oops, it did it again (w/apologies to Britney Spears)
Oops, it did it again (w/apologies to Britney Spears)
PMI goes below the key line, yields are dipping, and might just plunge
It’s looking like a recession is coming, or already here. Frankly, outside of the obvious human concerns (job losses, tougher times for many families) that we should all have, the investment implications to me are the same as any other market conditions that arise:
I just want to figure out how to make money without losing big along the way
I want to do it consistently
I don’t want to lose sleep over it
I want to learn every day, be flexible in my approach, and adapt as markets change
I want to use and master as many modern investment “tools” as I can
AND, the last thing I want to be is complacent. I just don’t think self-directed investors can get away with that anymore. Why?
The markets are just a tool to get what we want out of our accumulated wealth. They are not our friend, and this isn’t a game. And here in August, it’s gettin’ real.
None of the above is intended to be harsh or to provide “shock value.” I just wonder how much the “game” of being a stock investor has moved investors to the point where they just think that dips can always be bought, that the Fed will always save us, and that the S&P 500 is the driver of retirement success. That’s what has seeped in over the past decade or so.
And maybe it will all turn out that way. I’m just not counting on that.
That is why the chart below turned the markets down today, and threaten to break some key “support” levels for the stock market if it goes just a bit further south. I tried my hand at drawing on my regular Ycharts output, and while I’m not artist, I think you’ll see that the four circles mark the times over the past 25 years where a drop in the US Manufacturing Purchasing Managers Index, a monthly economic indicator released this morning, tends to drop below the 50 (neutral) mark as recessions (grey areas on the chart) are approaching. The check mark I drew in is the the last time a dip below 50 did not produce a recession.
But again, these mean little to me. What I care about is the market reaction, and really the market opportunities which are created. One I’m watching carefully is the potential for yields to not just keep dipping, but to dive. Here’s an encouraging chart that feeds that argument. It is an ETF that owns an equal amount of US Treasuries across the yield curve (0 to 30 years). As opposed to looking at an ETF that focuses on short-term, intermediate-term or long-term bonds, this one is signaling that the whole thing may rise in price/fall in yield. We’ll see.
PERFORMANCE THAT MATTERS
We replaced the “since 5/1/24” column with “since 7/16/24” just in case that proves to be THE top of the move for the S&P 500. This is through Wednesday’s close, so you can add a chunk of red to most of those figures.
Importantly, the pattern continued today, with SPYD up 0.2%, SPY down 1.4%, and and FNGS down more than 2.7%. And bonds rose.
This market has been characterized by moves that are sharp but short-term in nature. That’s why the average stock of the top 1,000 (EQAL), despite some thrilling up moves, is still only up 2.8% annualized for 3 years. I wonder when anyone will notice?