Recession Review: June 2019

So, a lot of financial news outlets that were loving the "worst May since 1960s etc. etc." headlines and selling doom and gloom on the next recession got their clicks and panic. There were then a few "best June for the stock market since..." articles this month. Talk about commentary volatility!

As I mentioned a month ago, this kind of talk is a lot of noise. The market is choppy and sometimes it is choppy on interesting calendar dates and then that makes for fun headlines. But, the stock market is not the economy and, while it is not completely devoid of useful information to indicate the health of the economy, one must be careful to separate the signal from the noise.

What does this signal look like right now? No recession. No changes at all really! At least, from a model perspective.

The Endless Metrics Recession Indicator - June 2019

What to Watch

2019Q2 is in the books and now we await the first official quarterly estimate for GDP from the BEA at the end of July. While estimates from various forecasters have deteriorated slightly the past month, there isn't an expectation for anything catastrophically bad.

Barring a complete negative GDP surprise, there are two more interesting releases to quickly highlight. The first is the jobs report this Friday. Last month saw a relatively weak jobs report, so will that downward trend continue or was it just an anomaly? The second is the Fed decision. Will they cut rates? My personal opinion is that they shouldn't...but I am just one guy versus an institution with some of the brightest people out there who think about this stuff full time. So, whatever they decide I trust!

2019Q3 and Beyond

Very little has changed since last month and that article is still relevant, so I won't write extensively just for the sake of it.

For 2019Q3, I haven't seen anything yet that changes my opinion that there will not be a recession.

For 2019Q4, the impact from the flattening yield curve makes things dicier but there would need to be negative GDP readings to really start some panic. As of now, since I try to force myself to have an opinion even if it could be wrong, I don't see a recession starting. Let's keep this expansion rolling!


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