Perspective : Market Briefing: Recession Overload

< Back

Recession, what a loaded word. To many, it conjures up images of job losses, unpaid bills, lifestyle impact, and asset impairment. Financially, it might be the single word that produces the most fearful imagery. It gets your attention, and maybe that is the point.

Lately, I can’t escape this word. Almost everywhere I go and everything I read or watch, people are hyper focused on discussing this apparent inevitable recession. As I have stated before, this might be the most expected recession in history.

It should be noted, that while asset prices have been substantially impaired in 2022, there has been no recession yet. Not for the U.S., the Euro block, Japan, China, or Australia and Canada. So far, the pontificators have been wrong. I know, they are not wrong, I think they are just early.

At the time of this writing (October 26, 2022), third quarter GDP has not been finalized and announced. It should be noted though that the Atlanta Fed GPDNow expects 3.1% growth in the third quarter[1]. This is not recessionary, in fact, it is far from it. In the old pre-COVID days of the slow and low, this would be construed as a fantastic economic print.

Confused? How can we be experiencing economic growth during such a period of dire pessimism? Let’s break it down. The following is a table of the probable economic factors that the National Bureau of Economic Research (NBER) considers in determining whether we are in a recession or not.

NBER Potential Recession Factors

Details to Consider:
  1. Almost every data point that the NBER is probably monitoring to determine whether we are in a recession or not is near or at its peak. This would imply that we are close to the best economy ever, not the worst.
  2. Every one of these indicators are backwards looking. Investors should be forward looking.
  3. Rising interest rates have yet to flow through to the economy and earnings. Generally, interest rates take about a year to reach their full impact.
  4. I think there is a significant chance that these conditions will deteriorate. At this point, I consider this to be the consensus and priced opinion.
  5. Historically, by the time recessions are officially announced, the best buying opportunities have often passed.
  6. You simply can’t be an investor without worrying about something, there is always something to worry about.
  7. There is also a good chance that conditions won’t turn out as bad as many are predicting.

[1] https://www.atlantafed.org/cqer/research/gdpnow

Information provided herein reflects Frontier’s views as of the date of this document and can change at any time without notice. Frontier obtained some of the information provided herein from third party sources believed to be reliable, but it is not guaranteed, and Frontier does not warrant or guarantee the accuracy or completeness of such information. The use of such sources does not constitute an endorsement. Frontier’s use of external articles should in no way be considered a validation. The views and opinions of these authors are theirs alone. Reader accesses the links or websites at their own risk. Frontier is not responsible for any adverse outcomes from references provided and cannot guarantee their safety. Frontier does not have a position on the contents of these articles. Frontier does not have an affiliation with any author, company or security noted within. Frontier reserves the right to remove these links at any time without notice.

Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. They are not intended as guarantees of future returns and should not be relied upon in making investment decisions.

Frontier Asset Management is a Registered Investment Adviser. The firm’s ADV Brochure and Form CRS are available at no charge by request at info@frontierasset.com or 307.673.5675 and are available on our website www.frontierasset.com. They include important disclosures and should be read carefully.

102822DWM102823

Related Content