Final Shoe Drops

Back in February, I summarized a few potential recession signals. In that commentary I also stated;

“However, I’ll start to get really concerned when this ISM Purchasing Manager’s Index drops below 50, which would round out a trifecta of recessionary signals.”

Today, it was announced that the ISM Manufacturing PMI has contracted with a reading at 49.1 (below 50 indicates contraction).

Bloomberg has a great article on the topic here. Some key takeaways from the report per Bloomberg:

  • “The Institute for Supply Management’s purchasing managers index fell to 49.1 in August, weaker than all forecasts in a Bloomberg survey of economists…”
  • “The group’s gauge of new orders dropped to a more than seven-year low, while the production index shrank to the weakest level since the end of 2015.”
  • “Manufacturing is technically already in a recession in the U.S. with a Federal Reserve measure of output declining in two consecutive quarters.”
  • “By one measure, global factory activity has declined 15 straight months and contracted in the last three.”
  • “The ISM’s measure of new orders, which are tracked by some as a leading indicator of a downturn, declined to 47.2. It was the first time since December 2015 that the gauge fell below 50…”
  • “A measure of export orders, a proxy of overseas demand, sank to 43.3, the lowest reading since April 2009 during the depths of the last recession.”

Many economists and pundits seem to be anticipating a recession starting in 2020 or 2021. The data would indicate we should not be surprised to see it start in 2019. Remember, the NBER is the organization responsible for officially declaring recessions and recessions are usually declared about 6-9 months after they begin, on average. So even if one were to begin in 2019, it likely would not be officially declared until mid-2020.

Are you confident your portfolio positioning is consistent with your long-term financial goals or is it possible you may be jeopardizing everything for which you’ve worked and saved?

Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain.

Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions. Many different factors impact prices including factors not mentioned here.

This is NOT investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed.