Recent developments in the U.S. economy have heightened the potential of a recession, driven
by a combination of decreasing interest rates and rising unemployment. The Federal Reserve’s
July 2024 report indicated a spike in the unemployment rate to 4.3%, the highest since 2021.
This has fueled concerns as employers added fewer jobs than expected.
The Sahm Rule Recession Indicator, a tool that signals the onset of a recession when the
unemployment rate increases by 0.5 percentage points or more over a short period, recently hit
0.53%, further reinforcing fears of an economic downturn. The situation is exacerbated by
declining interest rates, which are often a response to slowing economic growth but can also
signal an impending recession if coupled with rising unemployment.
Adding to these concerns is the Buffett Indicator, which compares the total market capitalization
of U.S. stocks to the nation’s GDP. Currently, this indicator suggests that the market is
significantly overvalued, another potential red flag for investors worried about economic
stability.
The convergence of these factors—rising unemployment, falling interest rates, and the elevated
Buffett Indicator—suggests that the U.S. economy may be on the brink of a recession, though it
remains to be seen whether these indicators will fully materialize into a broader economic
downturn.
We have been working on and still are repositioning your portfolio as high growth is not to be
expected in the near future. You will see a small mix of small/mid-cap being added as those
companies typically borrow money. Since money is becoming cheaper to access they could
potentially benefit. FYI, big companies such as Amazon, Google, etc. have so much money on
hand that they typically have little concern about interest rates as they self-fund their projects.
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training. Information presented is for educational purposes only and is not intended to make an offer or solicitation
for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk
and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or
tax professional before implementing any strategy discussed herein. Past performance is not indicative of future
performance. Insurance products and services are offered and sold through Jan Gleisner an individually licensed and
appointed insurance agent. CA Ins Lic # 0D77385.
