Why You Should Not Care About A Recession If Your A Trader

Imagine you're at a dinner party, surrounded by the glittering lights of economic chatter. The GDP is the star of the show, flaunting its stats and figures like a peacock in full display. Everyone is talking about it, almost mesmerized by its shiny allure. But if you're a strategist, like me, you might just find yourself sitting in the corner, not quite joining in the GDP fan club.

Why, you ask? Well, here's the kicker: I don't care about GDP. Don't get me wrong; it's essential in its own way, but it's like looking at the weather forecast when you're trying to figure out the future of your investments. Sure, it might give you a vague idea, but it's not going to tell you if it's time to take cover or bask in the sunshine. Most recessions are called by the NBER (National Bureau of Economic Research), but by the time they're shouting it from the rooftops, the storm has already arrived, and it's not something you want to wait around for.

So, what's my game plan? I'm all about helping our clients position themselves for where leadership is headed. It's a strategic dance, my friends, and you want to be leading the tango, not getting stepped on. And once we've set our sights on leadership, naturally, we think about where the market is going. Because, guess what? The market has a say in who gets to be the leader. But let's not jump the gun just yet.

Defining the Hard Landing

Now, let's chat about hard landings. If you're not knee-deep in the financial world, you might picture an airplane coming in for a rough touchdown. But in the game of economics, a hard landing is a different beast. My definition of it goes something like this: it's when claims start to rise, credit spreads widen, and earnings take a nosedive. Real simple, right?

We haven't quite had a hard landing in a sharp and dramatic way, but hold on to your hats, because it's on the horizon. I've got a couple of charts up my sleeve to show you that things are about to get a lot worse. And hey, I promise to keep it fun and engaging - no need to drown in spreadsheets and complex jargon.

The Rising Claims and Credit Spreads

Let's talk about claims. When I say claims, I'm talking about unemployment claims, the not-so-pleasant numbers that indicate how many people are out of work. When these claims start to climb, it's a sign that the job market isn't as rosy as it seems. You see, rising claims mean that more folks are knocking on the door of unemployment benefits, and that's never a good sign.

Now, credit spreads. Think of them as the gap between safe investments and the riskier ones. When these spreads start to widen, it's like a crack in the financial foundation. Investors get nervous, and they're not as willing to lend their precious dollars. When the flow of money starts to stutter, it's like trying to drive a car with a clogged fuel line - you're not getting very far.

So, rising claims and wider credit spreads are like early warning signs of an impending storm. They're the distant rumbles of thunder that tell you to take cover before the rain starts pouring.

The Deteriorating Earnings

Earnings, my friends, are the golden ticket in the world of business. They tell you how well a company is doing, and whether or not it's a good bet for investors. When earnings take a nosedive, it's like watching a blockbuster movie go straight to DVD. It's not a good sign.

Deteriorating earnings mean that companies aren't making as much money as they used to. This could be due to increased competition, rising costs, or a market that's just not as hungry for their products. Whatever the reason, it's bad news for investors, and it sends shockwaves through the stock market.

So, when you see rising claims, wider credit spreads, and deteriorating earnings, it's like the perfect storm brewing. It's a cocktail of economic trouble that can send markets into a tailspin, and it's not something you want to take lightly.

In Conclusion

In the world of economics and finance, it's all about staying one step ahead of the game. While the GDP might get all the attention, it's the less flashy indicators like rising claims, credit spreads, and earnings that give you the real scoop. As a strategist, my goal is to help our clients see where leadership is headed and navigate the treacherous waters of the market.

And as for hard landings, they may not have hit us with full force yet, but the storm clouds are gathering. Rising claims, wider credit spreads, and deteriorating earnings are like the thunder and lightning before the deluge. It's a call to action, a signal to batten down the hatches, and a reminder that in the world of finance, you've got to be ready for anything.

So, while the GDP continues to steal the spotlight, keep your eye on the horizon, my friends. The real action is happening in the shadows, where the rising claims, credit spreads, and earnings are telling a tale of economic twists and turns. And in the ever-evolving world of finance, being one step ahead can make all the difference. Stay sharp, stay savvy, and keep dancing to the rhythm of the market.