On today’s episode of On The Margin, Eric Basmajian Founder of EPB Research joins the show for a discussion on the business cycle slowdown that suggests a “recession is imminent”.
With Eric’s research following leading, cyclical and lagging indicators, he manages to keep a pulse on the current economic environment and its ultimate impact on markets. To hear all this & more, you’ll have to tune in!
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Timestamps:
00:00 Introduction
00:37 A Recession Is Imminent
05:37 Housing Is The Business Cycle
13:46 Permissionless II Ad
14:34 Markets Are Stuck In Limbo
24:26 What Will Cause Something To Break?
31:56 Is The Unemployment Rate A Good Barometer Of A Recession?
44:03 Research Ad
44:53 The Fed’s Outlook: What Should They Do vs What Will They Do
51:24 Final Thoughts
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Disclaimer: Nothing discussed on On The Margin should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets….(read more)
BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
REVEALED: Best Investment During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
Title: Markets Are Signaling A Recession Is Imminent | Eric Basmajian
Introduction
As the world grapples with the economic aftermath of the COVID-19 pandemic, signs of an impending recession are becoming increasingly evident. Cautious investors, financial analysts, and market experts like Eric Basmajian are raising alarm bells by pointing to the warning signals emitted by various markets. In this article, we will explore the reasons behind the concerns surrounding an imminent recession, highlighting Eric Basmajian’s insights into the current market indicators.
The Bond Market and the Yield Curve
One crucial indicator that has historically signaled an imminent recession is the yield curve. The yield curve depicts the difference between short-term and long-term interest rates, and a significant flattening or inversion of the yield curve is viewed as a reliable predictor of an economic downturn. According to Eric Basmajian, the yield curve has inverted on multiple occasions since 2019, portending a forthcoming recession. This inversion signifies that markets are worried about the long-term prospects of economic growth, leading investors to seek safer long-term bonds in anticipation of challenging times ahead.
Stock Market Volatility
Another critical factor that Eric Basmajian highlights is the increased volatility in the stock market. When investors become uncertain about future prospects, they tend to sell off stocks, leading to significant fluctuations in the market. Stock market volatility reflects underlying concerns about economic stability and the potential for decreased corporate profits. Basmajian points out that the erratic behavior of the stock market in recent months has been indicative of a weakening and fragile economy on the brink of a recession.
Global Trade and Manufacturing
The global trade landscape also plays a significant role in signaling an economic downturn. Eric Basmajian emphasizes that the ongoing trade disputes between major economies like the United States and China have escalated the possibilities of a recession. Trade wars not only disrupt global supply chains but also drain business investments due to uncertainty. Additionally, the global manufacturing sector has been experiencing a downturn, with declining demand and weakened consumer confidence due to the pandemic. These factors collectively contribute to an environment conducive to a recession, as both domestic and international trade suffer.
Consumer Confidence and Job Market Conditions
The level of consumer confidence and the state of the job market are crucial factors influencing an economy’s health. Eric Basmajian observes that consumer confidence is declining, as people grow increasingly concerned about their financial security due to the economic uncertainty surrounding the pandemic. By cutting back on spending, consumers contribute to a slowdown in economic growth. Simultaneously, the job market is witnessing increased job losses and reduced hiring, further dampening consumer sentiment. Negative job market conditions can be a telltale sign that a recession is approaching.
Conclusion
As global economies strive to recover from the devastating impact of the COVID-19 pandemic, the emerging signals of an impending recession cannot be ignored. Eric Basmajian highlights the inversion of the yield curve, stock market volatility, global trade disruptions, declining manufacturing activities, and deteriorating consumer confidence and job market conditions as imminent recession indicators. While the timing and severity of a recession remain uncertain, it is crucial for policymakers, businesses, and investors to closely monitor these market signals and prepare for a potential economic downturn.
Market declines, soaring inflation, a significant increase in interest rates by the Fed, and rising Treasury yields all point to additional losses for portfolios this quarter. How can I profit from the present market turbulence? I'm still debating whether to sell my $125k ETF/Growth Stock portfolio.
The longer drawn out route to the possible eventual recession is due to the 6 trillion that was printed during the pandemic. All that money still sloshing around keeping the economy propped up.
The labor market is far too tight for a recession to already be present. Once that softens let's check back.
A perfect storm is brewing in the United States. Inflation, bank collapse, severe drought in the agricultural belt, recession, food shortages, diesel fuel and heating oil shortages, baby formula shortages, available automobile shortages and prices, the price of living place. It's all coming together and it could lead to a real disaster towards the end of this year (or sooner). With inflation currently at about 6%, my primary concern is how to maximize my savings/retirement fund of about $300k which has been sitting duck since forever with zero to no gains.
Oops, at least he’s young maybe before his old will have a recession and then that will be something he called right??
This interview isn't aging well.
Times are weird. The US dollar is losing purchasing power due to inflation while strengthening against other currencies and assets. The stock market, real estate, crypto AND precious metals are down because people are fleeing to the "safety" of the dollar. where else can we put our investment money? I can't afford to see my savings of around $320,000 turn to dust in front of my eyes.
US stocks and Treasury yields rose on Thursday, as the Federal Reserve chair warned interest rates will need to increase further for inflation to slow to its 2 per cent target. I'm still at a crossroads deciding if to liquidate my $138k stock portfolio, what’s the best way to take advantage of this market?
Interesting , a number of the most eminent market experts have been expressing their views on the severity of the impending economic downturn and the extent to which equities might plummet. This is because the economy is heading towards a recession and inflation is persistently above the Federal Reserve's 2% target. As I'm aiming to create a portfolio worth no less than $850,000 before I turn 60, I would appreciate any advice on potential investments.
To much interest being paid out right now with the interest rate where it is for a deceleration of the dollar to occur. We are nowhere near a recession.
Currently I'm just being smart and frugal with my money, I'm in the green 47% over the last 15 months and l've accumulated over $700K in pure profits from DCA’ing into stocks, ETFs, dividends and futures. However I’ve been in the red for a month now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait.
I have a 3 fund portfolio consisting of 33% S&P, 33% Total stock, and 33% international. I feel a need to focus on complete growth so I went 100% stocks, but does the SP500 and TSM overlap too much to make sense holding both? However I’ve been in the red for a month now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait but watching my portfolio of $450k dwindle away is such an eye -sore.
In San Francisco the downtown is in serious decline. Hotel owners are walking away from properties and the largest mall gave the keys back
Inevitable
The market is down still, I've been looking up strategies and apparently both bull and bear market condition provides equal avenue to accrue massive gains, and a news article particularly mentioned a 54 year old that made $180k in 5weeks, how do I learn these strategies, my portfolio has been stagnant for months.
recession around the corner for a while already
Clean shaven ???? Better hygiene now ?
As a 20+ year corporate finance GenXer, I feel humbled by such an articulate and brilliant young man.
Love Basmajian he's the best.
God he’s hot
The guest is great. I tend not to watch this host, though, because of his speech disfluency (ending every sentence in "right?"). It's like "um" or "ah" and it makes it difficult to listen, with the added element of making the person seem unsure of anything they are saying. Thank goodness Eric is very easy to listen to and has command of his research.
The cause of this recession is most likely external. The United States is losing influence as a government reserve currency for the first time in decades. Less money is being spent on stock and oil trading than in the past, and there are no more economies to utilize to control inflation. They all provide evidence in favor of the theory that a new multilateral world order is being created.
Retiring in 20 years? Due to inflation, you may need upwards of $2.6 million to maintain your existing lifestyle, with the ongoing effects of high inflation, lower forecasted stock market returns, and stagnant wages, achieving a secure early retirement could be more challenging than ever before.
35:40 : Jim Bianco covers this on his YT Channel on why the response rate has been coming down over time
Market's are signaling recession is near???
Like they stated at the beginning of this interview…the CRE risk is being held with private equity investors (ultimately public pensions) who invested/financed all of these Luxury hotels and office buildings in major US cities. These larger scale projects (>$15mm) are most at risk and smaller regional banks just don't possess the risk being stated in the media. This is a visibility and reporting inconsistency, of course banks hold the majority of CRE loans…that's the only type of lending they are really incentivized to engage in following the GFC; however the risk embedded in CRE being discussed daily is likely held by non-bank owners or g-sib banks. I would also wager that PE firms who own these properties have securitized their loans with other assets or a pool of assets in which the majority of the collateral is not actually CRE and therefore is not reported as a CRE loan with the FI that holds those loans. This makes me think it's actually the TBTF banks that have exposure here…but our public reporting requirements can easily hide this. For example, CALL Reports and UBPR data is based on the majority of the collateral type securing a loan, so >=51% of the value is what gets reported.