Recession Watch

By Graham Summers, MBA | Chief Market Strategist

If you’re looking for a reason why the U.S. hasn’t slipped into recession yet, the answer is simple…

Uncle Sam is propping up the economy. And it’s working… for now

Some items of note:

• Since, mid-2021, public sector job growth has outpaced private sector job growth.
• Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
• In June, the government accounted for  1/3rd of all job gains.
• When you add private sector jobs that are funded indirectly by the government, (healthcare, education) Uncle Sam accounted for 74% of ALL jobs created in June!

As I mentioned earlier, the government is propping up the economy via hiring and social spending.  This is why the U.S. economy refuses to break down into a recession despite weakness in the private  sector.

Small wonder then that stocks keep ripping higher. The S&P 500 has hit new all-time highs in each of the last five weeks!

Put simply, this is a raging bull market courtesy of an economy that is being propped up abject government spending that is funded by the largest deficit as a percentage of GDP in the history of the U.S. (outside of WWII).

At some point this situation will end… BADLY. But in the meantime, we need to ignore all the doom and gloom and ride this bull market for as long as possible.

Think about the raging bull market that occurred in the early ’00s. The first signs of the Great Financial Crisis appeared in mid-2006. Those who panicked based on this, had to wait another 20 months as the market rose another ~30% before stocks finally began to break down. 

Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.

In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”

I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

CLICK HERE NOW!

Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research

By Graham Summers, MBA | Chief Market Strategist

The Fed just confirmed my thesis.

Over the last week, I’ve noted that Uncle Sam is the economy now. 

What I mean by this, is that the U.S. government is spending so much money, and hiring so many people, that the economy is refusing to fall into recession despite weakness in the private sector.

By quick way of review…

• Since, mid-2021, public sector job growth has outpaced private sector job growth.
• Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.

Put simply, the “fix” is in as far as the economy is concerned.  And it’s Uncle Sam, NOT the Fed, sitting in the economic driver’s seat.

The most powerful financial insider in the world, Fed Chair Jerome Powell, confirmed this in a speech at the ECB Forum on Central Banking yesterday.

Some highlights from Fed Chair Powell’s comments.

• The budget deficit is very large, and the deficit path is unsustainable.
• Debt sustainability should be a real focus going forward, should be tackled sooner or later.
• Fiscal policy is a job for elected officials.
• The Fed has been told to stay out of politics and they do.

(h/t Bill King)

This is a MAJOR tell from the most powerful financial insider in the world:  the Federal Government is the one running the “economic” show right now. And it is issuing a truly jaw dropping amount of debt to accomplish this: the Biden administration is on pace to add $9 trillion in debt in just four years.

See for yourself… the U.S.’s debt load is going parabolic.

At some point, this is going to be a REAL problem. But for those of us focusing on making money from the markets, the important thing to note right now is that the economic “fix” is in. And the Fed’s not going to get in the way.

Small wonder then that stocks keep ripping higher. By the look of things, the S&P 500 will hit a new all-time highs later today.

After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.

In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”

I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

CLICK HERE NOW!

Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research

By Graham Summers, MBA | Chief Market Strategist

The most important thing for investors to understand about the economy is that “it is different this time.”

We’ve already assessed how multiple previously accurate recession indicators (yield curve inversion, Sahm Rule trigger, etc.) have registered false positives in this cycle. 

Why is this happening?

For one thing, the U.S. has never voluntarily shut down its economy. It’s also never pumped $11 TRILLION (an amount equal to over 50% of GDP at the time) into its financial system in the span of 20 months.

But surely both of those items have been factored into the data by now, right? 

Sure, but you also have to consider that the money printing/ spending, hasn’t stopped! The U.S. is currently running the largest deficit as a percentage of GDP outside of WWII.

It is VERY difficult for the economy to roll over into recession with this going on. Indeed, in many ways, the government IS the economy right now.

Since mid-2021, job growth in the public sector/ government (red line in the chart below) has outpaced that in the private sector (blue line in the chart below).  

The government isn’t just hiring, either.  It’s also putting out gargantuan amounts of money via social spending. As E.J. Antoni notes, 40% of the growth in income in 1Q24 was from government transfers (read: spending). Indeed, government transfers were the SINGLE largest contributor to personal income growth in 20 states! 

So Uncle Sam isn’t just hiring… he’s also handing out money by the tens of billions of dollars!

Again, it’s VERY difficult for the economy to roll over into recession with this going on. I’m not saying this will work forever. But we need to see the private sector absolutely collapse to overcome all these government interventions in order for the economy to roll over into a REAL recession.

After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.

In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”

I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

CLICK HERE NOW!

Best Regards

Graham Summers, MBA

Chief Market Strategist

Phoenix Capital Research