Dear Reader, Another of the many moving parts in the economy right now is the escalating trade war between America and China. The costs are starting to be felt. In fact, the latest tariffs should cost the average American household $831 this year, according to the Federal Reserve Bank of New York. You can see that prediction reflected in the already existing trend here: Consumers are feeling the pain and so are businesses. Either a company bears the brunt of the tariff through a lower profit margin, or the consumer gets stuck with higher prices. Or both. Meanwhile the stress over trade is also drawing attention to other signs of economic weakness. I’ve mentioned to you already that US industrial production—which measures everything produced in American factories—has slid lower for five straight months and sits at its weakest point in two years. What happens when that turns negative? Well, I’ve got some numbers for you now… When industrial production (PMI) drops below 50 on the 0 to 100 scale, investors should prepare for negative or very low S&P 500 returns. That’s because the last five times it’s happened, market performance went backward three of those times, with a low point of -37.01% for the following 12 months. Another important indicator that a recession is coming. Discuss it now on my special blog. Until next time, Robert Ross
Senior Equity Analyst
P.S. A blog reader asked me what the Fed would do if we see a significant market drop of 40%. I discuss our central bank’s likely response in my reply. I’ve also answered other queries on topics such as recession indicators, energy dividend stocks, and inflation hedges. If you haven’t visited by now, you really should. Your most burning question about the recession may have already been asked… and answered. Get answers about defending your portfolio and generating more income during crises. See you there! | 