Market Insights
Market Related NewsQuarterly Updates

Market Insights, Research and opinion from the team at 2X Wealth Group

Interested in receiving news and updates in your inbox? Subscribe to our blog.
WELCOME TO THE 2X WEALTH COMMUNITY!
Lori Zager & Lisa James
OOPS! SOMETHING WENT WRONG WHILE SUBMITTING THE FORM. PLEASE TRY AGAIN OR CONTACT US AT LORI@2XWEALTH.INGALLS.NET
MARKET INSIGHTS
May 19, 2023
A Pollyanna* Market?
By 2X Wealth Group
If you just landed from Mars and we told you that three good sized U.S. banks had failed, the Federal Reserve had raised rates 5% in 13 months, the yield curve had been inverted since last year, the latest Senior Loan Officer’s Survey showed banks less willing to lend while already at recessionary lending levels, and according to Treasury Secretary Janet Yellen, we are within two weeks of the government running out of money to pay its obligations, would you believe the S&P 500 is up about 9% thus far this year?
While the equity market displays optimism, especially in large tech stocks, forward-looking indicators are far more pessimistic.
  • The Conference Board Index of Leading Economic Indicators (LEI) fell in March for the twelfth monthly decline, now down 7.8% year over year. This is a magnitude never seen outside of recessions.
  • As a recession gauge, continuing unemployment claims are a somewhat better indicator than the headline initial jobless claims. As of the week of April 10th, continuing claims were up 22.1% from the year earlier. Any rise in continuing claims greater than 10% on a year-over-year basis has never occurred outside of a recession.
  • We have discussed inverted yield curves and their predictive power in past blogs. The New York Federal Reserve uses a ‘recession probability indicator’ which is their proxy for an inverted yield curve. It is defined as the three-month Treasury bill yield minus the 10-year Treasury note yield. As you can see in the chart below, spikes in this indicator have been associated with recessions.
What do we expect for corporate profits and revenues?
  • There has never been an inverted yield curve setting that did not also foreshadow a recession in corporate profits.
  • The Fed’s most recent Senior Loan Officer’s Survey (SLOS) showed a further tightening of already recessionary lending standards in this quarter. Changing lending standards are a good predictor of future bank lending and corporate revenues. So, one would expect both to decline significantly by year-end.
Employment and consumer spending have been a bright spot thus far - the primary reason markets have remained positive.
However, as you can see from the chart below, the banks’ willingness to lend to consumers is dropping, and we would expect spending to follow.

The Debt Ceiling and the upcoming X Date could disrupt markets.
Earlier this month, Janet Yellen said the U.S. government will run out of money to make payments as of June 1, 2023 (called the ‘X date’). While brinkmanship about raising the debt ceiling to allow Government funding violently disrupted markets in 2013, equity prices don’t tend to react until a few days away from X date. Dan Clifton from Strategas Research Partners summarizes the situation perfectly:

“Policymakers often talk about default on the U.S. debt during debt ceiling debates, but the threat of an actual default of the U.S. debt is an extremely low probability. We (believe) this is a political argument designed to pressure the other side into moving forward on the debt ceiling and/or their preferred attached policies. In reality the U.S. government has more than enough cash flow to pay interest even if the ‘default date’ is reached.

Should Congress fail to raise the debt ceiling, the government would have enough money for Social Security, Medicare, Defense, and interest. Other government spending would come to a halt, which is akin to a government shutdown.

In this current cycle, the prioritization of government spending would be short lived, as the Treasury expects new tax revenue on June 15th and new extraordinary item cash on June 30th, which can cover through the end of July. As such, we see little chance of default even if Congress does not act.

The debate right now is “how” to raise the debt ceiling, not “whether” and that is an important distinction. In our view, the most likely outcome would be a cap on discretionary spending, rescinding of unspent COVID funding, and energy permitting reform…(it) is not a straight line. Policymakers may fail before they succeed.”

So, is a recession Looming?
Recently, when asked whether the U.S. economy would go into a recession, Fed Chair Jerome Powell said, “It is possible that this time really is different.” He noted “…We’ve raised rates by five percentage points in 14 months and the unemployment rate is 3.5%, even lower than where it was when we started.”
But, We Say – If it Looks Like a Duck, Swims Like a Duck, & Quacks Like a Duck, it Probably is a Duck!
* * *
[*] A byword for someone who has an unfailing optimistic outlook like the character from Ellen Porter’s 1913 novel.

The material included herein is not to be reproduced or distributed to others without the Firm’s express written consent. This material is being provided for informational purposes, and is not intended to be a formal research report, a general guide to investing, or as a source of any specific investment recommendations and makes no implied or express recommendations concerning the manner in which any accounts should be handled. Any opinions expressed in this material are only current opinions and while the information contained is believed to be reliable there is no representation that it is accurate or complete and it should not be relied upon as such. Investing involves risk, including loss of principal, and no assurance can be given that a specific investment objective will be achieved.  

The Firm accepts no liability for loss arising from the use of this material. However, Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith and nothing herein shall constitute a waiver or other limitation of any rights that an investor may have under Federal or state securities laws.


2x Wealth Group is a team at Ingalls & Snyder, LLC.,1325 Avenue of the Americas, New York, NY 10019-6066 |
(212) 269-7757

RECENT POSTS
March 23, 2023
RUN on the BANK

How Banks Work
What Causes Banks to Fail
How the Government is Responding
How Bank and Brokerage Accounts May Be Protected
Dilemma for the Federal Reserve

BY 2X Wealth Group
November 1, 2022
The Federal Reserve Has Taken the Punchbowl Away - We Are Worried About a Hangover

We suspect most people think getting inebriated is more fun than sobering up.

BY 2X Wealth Group
March 17, 2022
Inflation is as Violent as a Mugger, as Frightening as an Armed Robber and as Deadly as a Hit Man

We hate to sound like a broken record and ruin the party, but inflation presents a problem which won’t be easily fixed.

BY 2X Wealth Group
March 17, 2022
Regime Change

The four most dangerous words in investing are “this time is different”.

BY 2X Wealth Group
December 28, 2021
Investment Jargon for the New Year

A Tongue in Cheek Guide to the Latest Investment Concepts

BY 2X Wealth Group
August 31, 2021
From Beijing to Wall Street

The Changing Investment Climate

BY 2X Wealth Group
June 2, 2021
Bitcoin Billionaire???

Mine your reward coins as you read our blog!

BY 2X Wealth Group
February 3, 2021
Robinhood, Reddit, Gamestop and You: The Making of a Financial Flash Mob

Who doesn’t love the story of David’s triumph over Goliath? This past week a group of “small” investors made tremendous amounts of money (on paper at least) by buying stocks that were heavily shorted by large, sophisticated hedge funds.

BY 2X Wealth Group
October 28, 2020
Tricky Times

Markets hate uncertainty, and we can’t remember an election with such potential disparate outcomes. As we speak, the presidential race looks closer than ever, and the Senate majority is in question. Meanwhile the pandemic rages, and the President and Congress can’t agree on a stimulus plan. It’s no surprise stock market volatility has risen.  

BY 2X Wealth Group
September 15, 2020
Ash & Anxiety In the Air

Fires are burning. The presidential election has never been more heated, and our whole election process is repeatedly questioned. The cold war with China continues to brew regardless of the political party in power. A global pandemic has taken hundreds of thousands of lives and jobs, created loneliness for our seniors, and caused those entering hospitals for medical procedures to endure alone.

BY lori Zager & lisa James
June 11, 2020
Rip Van Winkle fell asleep after ringing in the New Year in 2020  

He woke up today and asked us for an update. We explained there was a global pandemic that had claimed almost 400,000 lives worldwide and more than 100,000 in the United States.

BY lori Zager & lisa James
March 30, 2020
Contagion and Containment:
How can we treat our ailing financial markets?

Medical experts say widespread lockdowns and social distancing must happen to contain the coronavirus and avoid overwhelming our hospital system.

BY LISA JAMES
March 19, 2020
The S&P 500 Catches
the Coronavirus

Bombs and tweets couldn’t sink the S&P 500, but Covid-19 did.

BY LORI ZAGER & LISA JAMES
December 20, 2019
Why Gold Often Glitters

While there is a role for gold in a diversified portfolio, gold is not universally liked or owned by investors and wealth managers.

BY LORI ZAGER & LISA JAMES
September 23, 2019
Alarming Spike Last Week in Banks' Short-term Funding Costs

The rates on overnight repurchase agreements, known as repos, suddenly rose above 9% last week.

BY LORI ZAGER & LISA JAMES
May 30, 2019
Why do We Care About the Shape of the Yield Curve? What Does it Tell Us?

We never really know where markets and the economy are headed, but market participants constantly look for clues.

Lisa James
November 15, 2018
The Art of the deal

Why does the current market tone feel different from the February and March stock market selloffs? 

Lori Zager & Lisa James
June 5, 2018
What role do Bonds play in your portfolio?

When do they protect you? When do they hurt you?

Lisa James & Lori Zager
March 22, 2018
Rising Interest rates? Inflation? How do they affect you?

The 10-year US Treasury bond bottomed in July of 2016. Since then, the interest rate on the 10-year has more than doubled from 1.39% to 2.9%.

Lori Zager & Lisa James
February 8, 2018
Volatile Markets

Worst Day Ever for the Dow Jones Industrial Average!

Lisa James & Lori Zager
November 20, 2017
Concerned about buying at the top

Perspective As the current bull market ages (from the bear market end in March 2009) investors are increasingly worried about buying at the peak.

Lori Zager
August 1, 2017
The Difference Between An ETF And A Mutual Fund

The basic difference between a mutual fund and an exchange traded fund (ETF) is that an ETF trades like a common stock as its price changes throughout the trading day.

Lori Zager
June 9, 2016
Brexit Flight to Quality

Brexit is spurring a flight to quality move into US Treasuries.

Lori Zager
June 1, 2016
Does it make sense to buy dividend paying stocks?

The short answer is yes.

Lori Zager

The views and opinions expressed in the posts on this page  are those of the author and do not necessarily reflect the position or views of Ingalls & Snyder, LLC.  Certain content on this page were originally  posted in a personal blog maintained and operated independently by the author prior to joining Ingalls & Snyder, LLC. 

The content on this page are for informational purposes, and is not intended to be a formal research report, a general guide to investing, or as a source of any specific investment recommendations and makes no implied or express recommendations concerning the manner in which any accounts should be handled. Any opinions expressed in this material are only current opinions and while the information contained is believed to be reliable there is no representation that it is accurate or complete and it should not be relied upon as such.  Investing involves risk, including loss of principal, and no assurance can be given that a specific investment objective will be achieved.