Pinpointing Your Favorite Recession Trade

QI TAKEAWAY — Labor market and broad economy inversions on Main Street are colliding with THE inversion that’s hit Wall Street. Rising recession risk is manifest in the two main U.S. consumer surveys. The top in the M&A cycle will further pressure the descent into contraction. Up in quality is a safer bet when economic waters become choppy. We’d add that it doesn’t hurt that protection has also gotten a lot cheaper of late.

  1. Per the Federal Reserve, credit card borrowing rose 1.5% MoM in February; the 2.2% MoM advance through mid-March sets up the largest two-month increase in nearly two decades, as Conference Board income expectations fell for a fourth straight month to a net 1.2 readings
  2. Both the Labor and Economy Curves, which measure the spread between Conference Board current and future expectations, were deeply negative in March; unlike past downturns, late cycle 2s10s curve inversion has arrived after households reported dour, recessionary prints
  3. At 1,905 through March 29, U.S. M&A deal count is well below December’s record 2,712; with synthetic revenue growth falling, late-cycle exhaustion should bring fears of job losses, especially given potential for a boomerang after last week’s sub-200,000 jobless claims print
Posted in Quick Quill.