Obsidian Market Update 1/27/2023
What is a recession? That depends on whom you ask!
According to the National Bureau of Economic Research (NBER), a recession is “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Each criterion—depth, diffusion, and duration—must be met to some degree for a downturn to be classified as a recession.
Forbes considers an economic contraction (a/k/a recession) to consist of five elements present for six months:
- A slowdown in consumer spending
- A spike in unemployment
- The slowing of manufacturing activity
- A drop in personal income through job loss
- An inversion of the yield curve
So, are we in a recession or not?
Some signs say no.
- Consumer spending is increasing, albeit slowly (up 0.9% in October over September and up another 0.4% in November of 2022).
- The average national unemployment rate in December of 2022 was 5%, and “There is as yet no evidence of employment starting to fall and unemployment starting to rise, as had been seen in the downturns of the early-2000s and the global financial crisis . . .”
- Personal income increased by 0.7% in October of 2022 and by 0.4% the following month.
Some signs say yes.
- The latest S&P Global Sector PMI data showed an output decrease in 14 of the 21 monitored sectors in 2022. “While backward-looking GDP estimates are so far showing surprising resilience for the fourth quarter in the face of Fed rate hikes, the PMI [Purchasing Managers’ Index] is an early warning indicator that all is not well in corporate America. Any further weakness in January would add fuel to recession worries.”
- The U.S. Treasury Yield Curve illustrates interest rates on Treasury bonds with different maturity dates. When the U.S. Treasury Yield Curve is inverted as it is now, long-term interest rates are lower than short-term rates. Because investors expect rates to fall in the short run, they buy longer-dated bonds. An inversion in the yield curve has preceded every recession since the 1970s.
We’re in Uncharted Waters.
According to conventional wisdom based on historic data, “Unemployment is high during a recession and job vacancies are numerous during economic boom.” (The FRED Blog, 3/24/22 A ratio for labor market tightness.) Today, that’s just not the case.
We’re keeping a close eye on the indicators and the actions of The Federal Reserve. We encourage you to keep your focus on your goals and stay in touch with us. We’re here to answer your questions.
Lifestyle
Where will you go in 2023?
Analysts from The Economist Intelligence predict a 30% rise in international travel in 2023 due to pent-up demand and the lifting of travel restrictions in most countries. Predictions from the U.S. Travel Association show domestic travel increasing from an estimated $941B in 2022 to over $1 trillion in 2023. All types of travelers are expected to flock to destinations that are affordable, offer a mix of natural beauty cultural significance and / or promote Indigenous experiences.
How We Help
“An investment in knowledge pays the best interest.” Benjamin Franklin
Recently we’ve met with a series of “second-generation” clients. They are the adult children of individuals who have used our Lifestyle Protector Process™ as the roadmap for achieving their goals. These Millennials want for their families what their parents already have: peace of mind that comes from goal-oriented, relationship-based financial planning services.
We are honored that multiple generations rely on us build, sustain, and preserve their financial futures. Please let us know if you would like to learn more about multi-generational planning.
Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member