Let’s look at the facts:
- 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.
- Retail Sales were at an all-time high in November…ALL. TIME. HIGH.
- New Home Sales hit a 10-year high in November. They were not much lower when recorded in April.
- Wage Growth is strong.
- Unemployment Claims are at a 49-year low.
- Personal Consumption is strong.
- Durable Goods are strong.
- Inflation is still at 2%…which is fine.
- 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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