Explore Our
“Off The Wall” Blog

Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.

Ten Curse-Word-Free Reasons We May Not Have THE RECESSION Everyone Thinks, Even Though We Will Have A RECESSION


Before I get going, be sure to read to the end of today’s blog for a very special congratulations to a UBS broker in Minnesota.

Okay – I am on the record stating I do not think that a recession is imminent. I acknowledge that we may have one in the near future while also acknowledging that we will definitely have one in the future.

But basically, I remain unconvinced that we will have one very soon or that we are in the middle of one right now.

ALSO: I remain unconvinced that I’m right because I could also be 100% wrong.

Did any of that make sense???

Either way, right or wrong, it doesn’t really change the overall strategic advice we have been giving, and we’ll continue to give during this market correction. Everyone should have a strategy to account for a recession, and no one should be managing their money for the recession.

So with that, I want to just jot down a few things that I see that give me pause when I hear people say a recession is imminent.


1. The Institute for Supply Management Reports

The Institute for Supply Management (ISM) publishes two important reports.

One is called the ISM Services report, and the other is called the ISM Manufacturing report. Every month the ISM publishes these two reports and a corresponding index level for each report.

When the published levels are above 50, it signifies an expansion in the services and manufacturing economies, and when it is below 50, it represents an economic contraction.

The current reading for the services report is 57. While this is down from a reading of 62 a year ago, it is still in expansion territory. The current reading for the manufacturing report is 55. Again while down from a level of 60 one year ago, it is also clearly in expansion territory.

It’s hard to imagine a recession when these two indices are still very much in expansion territory.


2. People are Traveling and Dining Out

I just read an article the other day that the Internet site Kayak has seen record search levels of interest in foreign travel. Since international travel is generally more expensive than domestic travel, I just don’t see how this would be going on if consumers were exhibiting recession-like behavior.

Additionally, I see reports that hotel occupancy rates continue to grow, and people are dining out in restaurants at pre-pandemic levels. That just doesn’t seem like recessionary consumer behavior.

Continuing with the above point – if personal leisure travel, hotel stays, and dining out is increasing, it makes sense that corporate spending on travel hotels and dining will quickly follow suit. If that assumption is correct, I again do not view that as typical recessionary consumer behavior.


3. Inflation Equals Recession

Everyone is equating the fact that there is high inflation with a high probability of a recession in the making. Very simply, as the Fed increases interest rates to decrease inflation, the likelihood of them causing a recession is high.

Okay, I get it. But what happens if inflation starts to fade and decrease without many more interest rate increases?

So here is something to consider. I believe that a great deal (if not all) of the inflation that we have seen is a function of the government pumping too much money into the system through relief and stimulus payments.

There is a long historical relationship between money growth and inflation.

But when was the last time anyone heard anything about new government spending programs?

If there is no new spending, the money supply will taper off, and the inflationary environment will start to moderate. If that continues to happen along with the supply chain improving, it’s possible inflation will come down much faster than the mainstream media leads everybody to believe.

I know this may be a stretch, but it’s something that everyone should consider as a possibility.

In fact, the money growth is now a year off its peak, and we have seen year-over-year inflation produce its first sequential fall in eight months…and market-implied inflation expectations have also fallen from the previous month’s high.

These things can’t be ignored. Again I may be wrong, and my observations could be way off the mark, but what if they’re not?


4. Gross Domestic Product

In our latest podcast, published on May 26th, Erin, Jessica, and I discuss the markets and some of the underlying conditions. Erin observed that with the first quarter 2022 real GDP showing a contraction of 1.4%, we are already halfway towards the classic definition of a recession, two back-to-back quarters of negative GDP growth.

That is true, and he is right.

But it’s also possible to swim halfway across the ocean and decide to turn around and swim back because you didn’t feel like going the rest of the way.

One thing that has me scratching my head over the probability that we see a second negative quarter is that the unemployment rate has fallen to a pre-pandemic low. As I recall, the economy was doing very well pre-pandemic, so it’s hard to imagine that we would have another negative contraction with the same unemployment rate as we had in a pre-pandemic economy.

Possible, of course! Probable? Well, I’m assigning it a lower probability than maybe a lot of other people think. Again I could be totally wrong, but I am now on point #4, and I find it very unlikely that I will be wrong on all four of these things (and more to come).

But with that, let’s continue


5. Covid

Does everybody remember the complete panic that was setting in due to the exponential spreading of the omicron variant in January? In January and early February, there were as many as 1.5 million new confirmed daily cases of COVID.


That means over a single workweek, 7.5 million new cases of COVID popped up. That’s like 5% of the workforce was in some version of isolation or lockdown.

Translation: they were not participating in the economy.

I don’t think it is a stretch to assume that the resurgence and fast-spreading nature of that variant in January hurt GDP.

This is another reason I think there is a pretty good chance we don’t see a back-to-back contraction in the economy.


6. Personal Income

Disposable personal income grew 4.85% in the first quarter. That is compared with an essentially flat growth rate in the fourth quarter of 2021.

While the first comment to that observation will invariably be, “Yeah, but what about inflation?” my response is, “What happens if I’m correct about point #3 and inflation will temper more quickly than people are anticipating? Would that cause a recession or an expansion in the economy?”

Answer – expansion.

Said a different way, I could be 100% wrong, and we could see a recession with personal disposable income rising by almost 5%, but I think it massively lowers the probability of that becoming reality.


7. More on GDP

Five components contribute to a quarterly GDP report—Personal Consumption, Fixed Investment, Changing Inventories, Net Exports, and Government Spending.

For those who are absolutely stuck on the notion that personal income growth was offset by inflation, I will offer that Personal Consumption grew at a 2.7% annual rate, the biggest increase in personal expenditures since the second quarter of 2021.

Personal Consumption contributed a positive 1.83% to the first-quarter GDP, making it the largest positive contributor of all five inputs.

The biggest offset was the negative 3.2% in Net Exports.

Remember, Net Exports is a “net number,” so it is the difference between what American consumers import and buy versus what we export. The big contributor to this is that our exports contracted at an annual rate of almost 6%, which was almost entirely explained by a reduction in the export of actual goods.

Well…the war in Europe is definitely one of the causes for that contraction, along with the recent COVID lockdown in China. So while I don’t expect any quick resolution to the horrible war being waged against Ukraine, I do think the lockdown in China will be resolved this quarter.

And if that happens, I think we will end up with a positive second-quarter GDP.

Again I could be totally wrong in this perspective or outlook, but right now, I am at item #7…making the probability that I am wrong about all of them even lower than when I was on point #5.


8. Initial Unemployment Claims

These have reversed direction since the middle of March and have started to go back up, so it will be hard for the Fed to over-tighten if initial jobless claims are trending up.

Unemployed people spend less money, which should have a disinflationary impact on the economy. If the Fed does not over-tighten, it increases the probability we may not see a recession.

Again the Fed could still over-tighten in the face of increasing unemployment claims, but again I think it adds to lowering the probability that we see a recession.


9. Used Car Prices are Falling

Car prices are a significant contributor to the inflation rating, along with energy and housing.


10. Housing is Still Strong

Housing is a huge contributor to growth. Yes, that will add to inflation, BUT I can’t imagine a recession if people are still buying houses.

I will end it here.


Plenty of things to just consider and think about if you are in the camp of a recession being a self-fulfilling prophecy.

I’m willing to be wrong about this, and maybe I am a little bit too far out over the ledge and the victim of some optimistic thinking. Still, I can’t help but consider that some of the above items I listed can just be swept under the carpet when considering the probability of a recession.

I remain in the camp that while it is certainly possible we will have a recession, the probability is not yet at a level that has me convinced we will absolutely have one in the short term.

I remain 100% convinced that we will have a recession at some point in the future – I just can’t say when. And as I’ve been saying for a few weeks, no investors should ever plan for the recession but should always be prepared for a recession.

As for what to do now with your portfolio, remember this – focus on the portfolio you need rather than the portfolio you wish you had.

This is also important – remember how this 20% pullback made you feel and compare that to how indifferent you may have been on the last day of 2021 when the S&P 500 finished the year up 27%.

The point I’m trying to make here is that losses hurt twice as much as gains.

Take stock of how this pullback made you feel and remember it the next time we are at an all-time high in the market. Use that as your gauge to make changes to your portfolio and raise the amount of cash you need to ride out the next 20% downturn in the market.

Nothing will make you feel better than being financially unbreakable when other people are panicking.

Finally, we have recently recorded two great podcast episodes.

One last thing…

A huge congrats to this guy (INSERT SARCASM).




I mean, THIS IS WHAT HIS BOSS IS LAUDING? Here’s the best part of the article:

“He did it! One MILLION Cold Calls!!” Jason Chandler, head of the Swiss bank’s U.S. brokerage business, wrote in the post, also calling the milestone a “shining example of hard work and determination–hallmarks of his character.”

Chandler added he had met Bottema in 1998 when the young broker was in a “small room” in the Wayzata office “diligently cold calling prospects to build a business.”

Using the powers of my CFA Charter and some arithmetic, (and Erin–back me up here)…if there are an average of 260 working days in a year (thanks, Google) that means 20 years equals 5,200 workdays (20 years * 260 days). Wow… so 1,000,000 calls divided by 5,200 equals about 192 calls per day or 24 per hour… basically one call every two minutes – leaving him exactly ZERO minutes to actually give advice.

Yeah, Jason, that’s a shining example of hard work and determination…truly hallmarks of character everyone should aspire to.

One last part of the article…

A spokesman for UBS declined to comment or make the broker available for an interview.

Keep looking forward.

DBA Signature

David B. photo

David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

Learn more ...

Stay up to date!

Subscribe to our “Off the Wall” Blog for articles and videos on all things wealth management, by all members of our Team. Unlike Facebook, we will never share your data with anyone.


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“MCM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.   

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MCM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.  

A copy of MCM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures.  

Please Note: MCM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MCM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.  

Please Remember: If you are a MCM client, please contact MCM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.