Recession Alert: Are We There Yet?


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Recession Alert: Are We There Yet?

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The stock market roller coaster continues and most investors are giving up. This is true even after the S&P 500 (SPY) rose above 4100, because there are fresh signs that we may have a recession among us that will awaken the bear market from its recent slumber. 40-year investment veteran Steve Reitmeister shares the rest in his latest comment below.

In the past few months, we have experienced some rather unattractive volatility. It’s like investors can’t decide whether to be bullish or bearish.


This is due to the many calls for a recession, which has led to a drop in share prices. However, when that didn’t actually happen, the market went up again. Like what happened last week, when bank failures were no longer in the headlines.

This week has been full of key economic reports, and there are already some interesting cracks in the economic foundation that need to be discussed. What this means for the market outlook will be the focus of today’s Reitmeister Total Return commentary.

Market Comment


We all understand that the combination of high inflation and a hawkish Fed is usually a recipe for a recession and a bear market. This explains why investors wasted no time hitting the sell button back in January 2022, leading to a formal bear market call in June from the S&P 500 (SPY) low of 3491 made in October.

However, here we are six months later with the same chance of a recession… but no proof on hand. This has led many investors to think about a recession not unlike “The boy who shouted: “Wolves“. This explains why stocks are 17% above the lows.

This notion that there is no real recession was fueled by the surprising strength of GDP in the first quarter. Just a few weeks ago the famous GDPNow Model from the Federal Reserve Bank of Atlanta indicated +3.2% of results last quarter. A slew of poor-quality economic reports followed, rushing it down to 1.7%.

Most notable of these GDP downgrade announcements was ISM Manufacturing, which came out Monday at a post-Covid 46.3 low. There was no light in this tunnel as each submetric was pointing in the wrong direction:


44.3 new orders vs 47 last month vs 49 forecast

46.9 employment vs 49.1 last month vs 50 forecast

Why were these results so much worse than expected?

Most likely, this goes back to what the Fed was talking about at its last meeting. These concerns about the banking sector were in themselves like another rate hike. Both in terms of the fact that this will lead to a tightening of credit, and in terms of the fact that it will increase doubts about the economic outlook, which will dampen demand.


Now let’s follow up on this interesting thread about the underperformance of the ISM Manufacturing Employment component, which is now at its lowest post-Covid, 46.9. Many of us, including the Fed, have pondered what it would take for employment to finally weaken, because this is probably the key nail in the coffin of high inflation.

So this weak reading is a curious start for wondering if employment is finally ready to roll over. And the very next day we get another hint that this trend may finally start. This is a sharp drop in job openings of 632,000 from JOLT’s monthly report, making it the lowest level since May 2021.

Think of it this way..

Step 1 before leaving is to stop hiring new employees. This reduction in the number of vacancies can be the mainstay for Step 2, since much larger layoffs are not far off, which will lead to higher unemployment.

Let’s remember the vicious circle that occurs when job loss is included in the economic component:

Loss of work > Decrease in income > Decrease in expenses > Decrease in corporate profits > Wash and repeat

Rinse and repeatis a recognition that the most common solution to declining corporate profits is to lay off more employees. This is how a crack in the foundation of unemployment can eventually become a much wider chasm.

The unexpected reduction of OPEC production just in time for the important summer automobile season did not help matters either. This caused oil to rise again from a recent low of $67 to over $80.

It doesn’t take a genius to figure out that this only exacerbates the Fed’s concerns about high inflation. Also, for the rest of the economy, if more money goes into the gas tank, much less can be spent elsewhere.

Add it all up and you can see why investors were wise to end their recent bull run on Tuesday. This pause will likely mean that investors will be keeping a close eye on the next round of economic reports to see if there really is more to worry about.

4/5 ADP and ISM Employment Services

4/6 jobless claims (leading indicator of employment status)

4/7 Government Employment Situation (with a focus on wage growth, which was public enemy No. 1 for the Fed).

Mid-April – Mid-May = Q1 reporting season

To sum it up, I think the stars will finally align and the recession will turn around starting in the second quarter, bringing the bear market back from its recent slumber. That’s why I’m sticking with my bearish portfolio strategy, which gained 0.73% on Tuesday as the market fell.

However, as in the recent past, if these recessionary forecasts do not materialize, then be prepared to bet on the market’s greater upside potential. This means keeping a close eye on every key economic report to understand where we are and what’s next.

Be sure to review these announcements as objectively as possible because those looking for a bear market may see one even if the facts do not support this conclusion. The same goes for you bulls who are overly optimistic at times only for Chairman Powell to sternly remind you of current realities.

Now let the chips fall where they can and we will trade accordingly.

What to do next?

See my new presentation REVISED AMENDMENT: Stock market outlook for 2023

There I will cover pressing issues such as…

  • 5 Warning Signals That The Bear Is Coming Back Right Now!
  • The banking crisis touches another nail in the coffin
  • How low will the stock fall?
  • 7 timely trades to profit on the way down
  • Plan your prey for the next bull market
  • 2 trades with 100%+ upside potential when a new bull appears
  • And much more!

If these ideas interest you, click below to access this vital presentation right now:

REVISION: 2023 Stock Market Forecast >

I wish you success in the investment world!

Steve Reitmeister…but everyone calls me Reity (pronounced “Right”)
CEO of and Editor of the Reitmeister Total Return

Shares of SPY rose $0.37 (+0.09%) after the close of trading on Tuesday. Year-to-date, the SPY is up 7.27% compared to the percentage gains in the underlying S&P 500 over the same period.

About the author: Steve Reitmeister

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Steve is better known to the StockNews audience as “Rate”. In addition to being the CEO of the firm, he shares his 40 years of experience investing in Reitmeister Total Return Portfolio. Learn more about Reity’s past, along with links to his latest articles and stock picks.


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