Market Notes – April 21/23

Stocks closed slightly higher on Friday afternoon as investors digested a final slate of corporate earnings and fresh economic data to close out the week. The S&P 500 rose 0.09%, while the Dow Jones Industrial Average  rose 23.99 points, or 0.07%. The technology-heavy Nasdaq Composite rose 0.11%. All three major averages closed the week lower.

The S&P Global’s flash reading on the US Manufacturing Price Index came in hotter than economists surveyed by Bloomberg had expected on Friday. Services PMI hit a 12-month high at 53.7, while Manufacturing PMI hit a six-month high of 50.4. Economists had estimated Services PMI at 51.5 and Manufacturing PMI at 49, per Bloomberg consensus data.

Two indicators with incredible records for accurately predicting a recession, are both forecasting a recession. The first is the inverted yield curve.

Since 1955, so in 68 years, there has been only one time where the yield curve inverted without there being a recession. Today the yield curve is the most inverted it has been in over 40 years.

Also, there have been ZERO times when inflation ran above 5%, with an inverted yield curve that did NOT result in a recession. Until this week, inflation has been over 5% for months.

The second indicator is the Conference Board’s Leading Economic Index (LEI). This week, the LEI fell to its lowest level since November of 2020.

“The US LEI fell to its lowest level since November of 2020, consistent with worsening economic conditions ahead,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “The weaknesses among the index’s components were widespread in March and have been so over the past six months, which pushed the growth rate of the LEI deeper into negative territory. Only stock prices and manufacturers’ new orders for consumer goods and materials contributed positively over the last six months. The Conference Board forecasts that economic weakness will intensify and spread more widely throughout the US economy over the coming months, leading to a recession starting in mid-2023.”

Over the last 40+ years, every time this indicator drops < 0 and stays there for 2+ months a recession followed 100% of the time. This index has been < 0 for over 6 months now.

We have a chart that we keep showing our subscriber & it highlights when the Fed is in a rate hike cycle like they are now, the bottom in the market aligns with when the Fed STOPS CUTTING rates, not STOPS RAISING them…this is a very key point.

Typically, when the Fed pauses, there is a brief uptick in the markets, But when the Fed STARTS CUTTING, that is when the big LOSSES start to happen. So, markets typically fall as rates are cut & not until the FED STOPS CUTTING do stocks start to rise again. Be careful!

With gold, there was a heist of $20 million worth  from the Toronto airport.

Gold & silver have had a terrific run here, with gold reaching 2063 on April 13. Silver has done even better, which is typical in a bullish trend for precious metals. In BULL markets silver outperforms gold & in BEAR markets silver underperforms gold.

One thing that we have been watching is that the mining stocks have been lagging the metals.  Eventually, this gap will close with either the miners rising to catch up to the metal,  or the metal falling to drop down to the miners level.

Stay tuned!

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