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Let’s look at the facts: 

  1. The yield curve is not inverted.  The lag between inversion and recession is months not days, as you can read about in our April blog post.   
  2. Retail Sales were at an all-time high in November…ALL. TIME. HIGH.   
  3. New Home Sales hit a 10-year high in November.  They were not much lower when recorded in April.    
  4. Wage Growth is strong. 
  5. Unemployment Claims are at a 49-year low.  
  6. Personal Consumption is strong. 
  7. Durable Goods are strong. 
  8. Inflation is still at 2%…which is fine. 
  9. GDP Growth is close to a 3-year high. 

We are in a period of modest growth.  Earnings crushed it again last quarter yet share prices have fallen from January. This means shares are at a better value now than they were in December. In fact, they are in line with the 25-year average forward Price/Earnings ratio of around 16x. 

Recessions are a VERY low probability when the economy looks as we have described above.  If we were to put this into the military’s DEFCON alert state, where a reading of DEFCON 5 is the Department of Defense’s lowest state of readiness and DEFCON 1 is when nuclear war is imminent, we are at DEFCON 5.   

Keep looking forward, 



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