On The Macro Show this morning, Hedgeye CEO Keith McCullough and Macro analyst Darius Dale discussed why we're likely headed for a recession. Here's McCullough on the sequence of events typical of most economic cycles:
"This is what happens when the Deflation Dominos start to fall. First inflation falls off, then capex, industrials and cyclicals, then the consumer and, at the end of that, employment."
Look no further than September's soggy durable goods orders report released this morning. While the media focused on the dismal month-over-month decline of 1.2%, after being down 3% in August, McCullough honed in on the year-over-year data which "went recessionary in February."
Other indicators are similarly flashing red...
Like today's Consumer Confidence reading... it came in at 97.6 for October versus September's 102.6. According to Dale, consumer confidence may have reached an inflection point that has preceded a recession in the last three economic cycles.
Next up, new home sales... they were off 11.5% from the previous month, August, which was also downwardly revised.
And then there's Industrial Production... which also appears to have peaked.
(Anecdotal evidence of this industrial recession continues to roll-in as companies report earnings. Shares of engine manufacturer Cummins are down 9% today after lowering its full-year revenue and earnings guidance. In a statement, the company noted "weak demand" and a "slowdown in global markets.")
So what does all this mean for investors? Only those who have been patient on #Deflation and #GrowthSlowing have been winning in 2015. In other words, we will stick with "the most bullish call on Wall Street." Long TLT.
Slow and steady wins the race.