Is it just me, or are there a million “recession indicators”?
It’s hard to know which to pay attention to.
The inverted yield curve is all the rage today. That’s when short-term rates are higher than long-term rates.
Right now, according to Bloomberg, the government will pay you 4.97% if you loan it money for 6 months. But only 3.5% to loan it for 10 years.
Why does it signal a recession? Because an inverted yield curve doesn’t make sense.
The long-term rate should be higher. And it usually is. The market is betting that a recession will push rates down, and all will be back to normal.
As dull as all that sounds, there is a reason why you keep hearing about it.
It’s one reliable indicator of recessions. And right now, alarm bells are sounding. Everyone should take these warning signs seriously. Walking into a recession blindfolded is a sure way to wreck your retirement.
Today, I’ll explain why even this indicator isn’t perfect, provide an even better recession predictor, and give you an opportunity to profit from our new innovative solution-built strategy to combat a recessionary environment.
Here at Intelligent Income Daily, it is part of our mission to bring you the best – and safest – income investments in the market.
Don’t Forget – It’s A Market of Stocks
There is a saying I used to hear at the hedge fund I worked at during the Great Recession. “It’s not a stock market, it’s a market of stocks.” I assure you, none of us came up with it.
But we repeated it for a reason – it’s true. Even if you invest in an S&P 500 ETF or mutual fund, you are still investing in individual stocks. Investing in “the market” is an illusion. It’s the health of all the individual companies that decide your investing fate.
The story is the same with the national economy. Sure, there are headline-worthy GDP and employment numbers. And those matter. But that’s way up at the ETF-level. The most important data is hidden below it.
What if I told you that each state has its own “GDP”? And that the Federal Reserve Bank of Philadelphia keeps track of it?
What I’m going to explain next is far more surprising. And important for your portfolio.
This chart shows the number of states with declining economies from the late 1970s through the last report issued in December of 2022.
The shaded areas are significant recessions. “Coincidence Index Retractions” is bureaucrat speak for slowing economy. They use four data points with the end result mirroring state-level GDP.
In the early stages of every recession, this indicator jumped above 20. That means at least 20 states had declining metrics.
What makes this especially useful is another fact. There were only two times in the past 50 years that the number of struggling states rose above 20 and a bad recession didn’t happen.
That makes this indicator extremely reliable. As you can see, the last report showed that 22 states are in decline.
That’s just above the magic limit of 20. In all but two cases, the number of states in trouble shot up to at least 35 before the economic pain lessened.
The inverted yield curve has at least one major weakness. The Federal Reserve can “engineer” it by raising short-term rates. Which is exactly what they’ve done.
There isn’t anything natural about today’s interest rates. That’s why Wide Moat Research uses many tools instead of just the ones popular in the news.
And that’s the beauty of the metric we are sharing with you today. The Federal Reserve can’t manipulate it with interest rates.
Stock Market Crash – No Problem
And right now, our improved recession indicator is telling us to tread carefully. Especially with the stock market. Fortunately, our team has been designing a solution built to handle the next recession.
Just like with our outside-the-box recession indicator, we aren’t following the same path as everyone else.
In fact, we are launching a brand-new service designed to keep your investments protected from a stock market crash, utilizing a little-known financial instrument Brad calls “C.O.M.”, contractually obligated money.
You can lock in tens of thousands of dollars that are protected from a stock market crash because it doesn’t involve any stocks.
To find out more, tune in this Sunday, February 26 at 9 a.m. ET. During this special event, we’ll be sharing our innovative strategy and will provide all those who watch to the end a free pick uniquely aimed at profiting during a recession. Click here to instantly sign-up for this event.
Analyst, Intelligent Income Daily