by Paul Hoffmeister, Portfolio Manager and Chief Economist
At the link below, you’ll find a compelling market commentary presentation from our September Advisor Series event.
Discussion includes:
• major macroeconomic indicators suggesting a recession is likely
• reasons why those signals seem to have been incorrect so far
• the major risks and uncertainties looming today
In sum, it appears that the confluence of historic government spending, the eruption of new AI technologies since early 2023, the Fed intervention in Spring 2023, and a strong labor market worked to prevent a recession up to this point. But recession threats persist.
The U.S. manufacturing and service sectors are relatively weak, and the labor market appears to be cracking. Since 1970, when the unemployment rate cycles higher, it tends to have a negative momentum to it and can continue for a prolonged period of time. As a result, weakening economic data and employment conditions are threatening equity markets, which themselves carry high valuations.
Will the commencement of a new Fed rate-cutting cycle stave off recession? It’s certainly possible. But, as we show with the last three rate-cutting cycles (2001, 2007, 2019), recent history isn’t on the Fed’s side.
Paul Hoffmeister is Chief Economist and Portfolio Manager at Camelot Portfolios, managing partner of Camelot Event-Driven Advisors (CEDA), and co-portfolio manager of the Camelot Event-Driven Fund (EVDIX • EVDAX).
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