I kept the commentary short. Reply to this email if you have questions about any of the charts or want to share some insights.
1. Year to date US corporate bankruptcies are higher than any year since 2010.
2. The 3mth-10yr yield curve is the most inverted in history. The simplest explanation is the market is predicting a significant economic downturn.
3. As money shifts from deposits to money market funds, bank lending standards are tightening, and with it credit.
4. At the start, layoffs were about pro-active cost cutting. Now businesses are firing staff as a reaction to weaker demand.
5. The futures market is pricing in a steep decline in the Fed Funds rate over the next 18 months, in reaction to declining inflation and/or a weakening economy.
6. It’s a short sample period, but the latest correlation data shows that bonds are once again providing a cushion to stock declines.
7. While the labor market remains strong, it is weakening. Job openings as a proportion of total unemployment is starting to decline.
8. The number of people with $1000 monthly car payments has almost tripled over the past couple years.
9. The problem with bottom-up investing is investors miss the big picture, which ultimately impacts all assets. Even the best stocks can get decimated if discount rates, risk aversion and credit defaults are rising. Unfortunately, many choose to ignore macro forces, often because they have no choice but to remain fully invested (e.g. a mutual fund with a maximum cash balance).
10. Corporate earnings are now contracting.