Assessing the Likelihood of Recession - Adviser Investments

Assessing the Likelihood of Recession

We’re constantly assessing the bevy of economic reports released each week for signs of weakness. Chief Investment Officer Jim Lowell and Vice President Steve Johnson discussed their approach to data analysis in our recent quarterly webinar*: 2020 Conflicts—Impeachment, Tariffs & Global Dysfunction.

Please enjoy the excerpt below and click here for the full webinar replay to hear more.  

Steve Johnson: We look at each indicator that comes in, we look at all the economic news, but definitely we’re going to give more weight to those reports that show the health of the consumer. As we know, consumer spending makes up more than 70% of the economy. And as goes the U.S. consumer, really so goes the economy. So as a result, we want to focus on the health of the consumer. We want to look at their job status.

Steve Johnson: So we want to look at initial jobless claims, continuing jobless claims, average weekly hours, look at their wages, and look at things like retail sales. And as Jim alluded to, any signs of a weakening trend in these reports would give us some caution. But right now we’re seeing the consistency throughout in those numbers. So right now, as [Chairman] Dan [Wiener] alluded to, we are seeing slow growth, not no growth at this point.

Jim Lowell: So Steve, what about the global consumer? We talk about the U.S. consumer a lot. Does the global consumer impact our thinking about not just global markets, but the U.S. market as well?

Steve Johnson: Without a doubt, Jim. I think that’s really been the one thing that is befuddled investors, and as Dan and [Director of Research] Jeff [DeMaso] alluded to pundits, we’ve seen a slowdown across the world, and yet the U.S. consumer has remained extremely resilient. So we look at unemployment numbers here in the U.S., we look at wage growth, we look at retail sales, and really the U.S. consumer has done extremely well.

Steve Johnson: We looked at housing. The housing numbers last week were extremely robust and yet we’re seeing kind of this slow growth in Europe. We’re seeing the issues that China’s had. And so the U.S. has been the place where people have put the money based on the strength of that consumer.

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Click here for a replay of 2020 Conflicts—Impeachment, Tariffs & Global Dysfunction. Please contact us at (800) 492-6868 to learn more about comprehensive wealth management solutions.

*Webinar recorded after the market closed on January 23, 2020.

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