Can a recession be avoided?
#1
Friday the 13th passed with hardly a whimper as markets appear to be mired in a "sideways" mode.
The media continues to be concentrated in the election process and I personally am getting bored with the same old rhetoric from both sides. On the Democrat side we have Hillary and Sanders battling for the nomination. On the Republican side we have members split over whether Trump should be the nominee.
Whichever side wins, I don’t think a U.S. recession can be avoided as the economic data is "tepid." Another factor that cannot be overlooked is the global "recession" which is exacerbated by the influx of refugees from the Middle East adding to the economic problems of the eurozone. For now we are watching and waiting. Now for some actual information.
Interest rates
The 30-year Treasury bond closed Friday 166 25/32nds, up 1 and 11/32nds as money made the "trip" from equities to the relative safety of the U.S. Treasury market. The yield on the 10-year fell to its lowest level in over a month with the yield on the 30-year bond dropped by 5.1 basis points to 2.552% and was down eight basis points for the week.
Strong early reported data failed to detract from the negative overall economic views of some analysis including this author and we could see continued back and forth from risk to safety. For now we are on the sidelines but overall view of the global condition is negative.
Stock indices
The Dow Jones industrial average closed at 17,535.32, down 185.18 points as major retailer Wal-Mart lost 2.9% and Caterpillar Tractor lost 2.2%. The close was the lowest since late March. Selling in crude oil pressured the energy sector and risk averse investors once again sought the relative safety of the U.S. Treasury market.
The S&P 500 closed at 2,046.49, down 17.62 points on selling in financials, industrials, energy, and consumer goods. The Nasdaq closed at 4,717.68, down 19.66 points and is 5.8% for the year. We iterate our recommendation of implementation of strategic hedging programs for investors with large equity positions.