The View from 5th Avenue – 31 August 2022

The negative trend continues. Early on it seemed like markets were still making up their mind on where to go, and then the new & improved ADP numbers hit. Less new workers were added this month than expected, indicating the economy may not be as healthy as JOLTS yesterday implied (and continuing the trend of contrasting economic data). It’s seeming more and more likely that a recession may be on the horizon – our team is seeing an increasing number of data points that indicate so. The 2/10yr curve has been inverted since early June (similar circumstances have preceded the past 5 recessions), the Leading Indicators Index is down 5 months in a row (very rare to see this happen outside of recessions, last time it was negative for this many months was the Financial crisis), and the monthly supply of new houses has exceeded 11 months (every time this has exceeded 9 months, a recession has occurred). A grim picture is painted, but at least the month is behind us. Media was the day’s outperformer, closing in the green and led by Meta (META, 3.67%). Meta potentially being rewarded for it’s previous pivot to the metaverse, after Snapchat’s (SNAP, +8.63%) new strategic plan also named it as a priority. This new plan helping overshadow the pain of the 20% cut to Snap’s workforce. These moves helping tech hang on better than the broader market, but with value and growth neck in neck, today’s sell-off wasn’t overly selective.10 year yields moved higher, although as mentioned above, the 2/10 remains inverted. As we start what is seasonally the second worst month of the year, it’s important to keep hopes up. We are 3 weeks out from the next Fed meeting (now 69% chance of a 75bp hike), and Friday beings NFPs. Anything can happen!