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My Gut Feeling for June 4, 2024: Raising a Yellow Flag as Some Recessionary Signs Appear

My Gut Feeling for June 4, 2024: Raising a Yellow Flag as Some Recessionary Signs Appear

June 04, 2024

Last Thursday, the Bureau of Economic Analysis released its second estimate of 1st quarter 2024 Gross Domestic Product (GDP). The rate stood at 1.3%, adjusted downward from the advance estimate of 1.6%. That was a big miss. Furthermore, this compares to 4th Quarter 2023 GDP of 3.4%. Indications of an economic slowdown are evident in the numbers.

Concurrently, the Federal Reserve’s preferred inflation gauge Core Personal Consumption Expenditure (PCE) rose by 3.6% in the first quarter of 2024. This is slightly lower than the anticipated 3.7% PCE. Real consumer spending grew by 2%, lower than both the previously estimated 2.5% and the 3.3% growth reported in the last quarter of 2023. Inflation is slowing down, but no matter how you cut it, inflation is still above the Fed’s 2.0% target rate.

This Friday, the Bureau of Labor Statistics (BLS), another governmental organization, will release May’s job and unemployment report. Economists forecast a gain of 190,000, a slight uptick from 175,000 jobs created in April. Still, job creation has slowed down from the prior year. The unemployment rate is expected to remain unchanged at 3.9%.

In a bit of anecdotal evidence, the annual Americade biker rally in Lake George, NY took place last Wednesday through Saturday. It is a mini version of the Sturgis Motorcycle Rally in South Dakota. Normally the Village of Lake George is so crowded with visitors on motorcycles of all makes that you can hardly walk, and traffic is backed up going in and out of town. These visitors, mostly in their 50s and 60s, are big spenders. Local motels and vendors can make or break their season based on Americade. Even the Village racks up huge parking fees and ticket revenues during the event. For the first time in my memory, the traffic was sparse, and “vacancy” signs were posted all through town.

With Bidenomics stimulus ending, it finally appears that we could be entering the economic slowdown which might indicate a recession or near-recession. Furthermore, the signs that the Fed are looking for to begin to lower rates might be on the horizon.

From the stock market perspective, we need to be cautious if a recession materializes. Of course, there are many different opinions as to what defines a recession. Some economists look for two consecutive quarters of negative GDP. My problem with that definition is that it takes too long for that to occur and by the time it does, we may be deep into or exiting a recession. I prefer to define a recession by three consecutive months of declining jobs.

One stock market indicator signaling some caution is that the stock market advance is narrowing. That is to say, fewer stocks are leading the advance. So, I have begun to raise some cash. If the market has indeed topped, then we have cash to deploy off a correction. If the market continues to rise, that’s OK since our Alpha (outperformance versus benchmark indexes) is positive across all four of our strategies: Growth, Dividend/Value, Consumer Discretionary & Index.

Some good news, call it a silver lining, Nvidia’s (NVDA) 10 for 1 stock split will become effective on June 10 and Chipotle Mexican Grill’s 50 for 1 stock split (that’s no typo fifty for one) will become effective June 26. We own both.

Stanley Cup Final – Florida Panthers vs. Edmonton Oilers. It will be Florida’s defense/goaltending versus Edmonton’s explosive offense. Better goaltending tends to win and I will put my money on Florida.

 

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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long CMG & NVDA  - although positions can change at any time.

Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, (LVAM) an investment advisor representative, specializing in high-net-worth private wealth management. LVAM is affiliated with Kingswood Wealth Advisors Services, a registered investment advisor.

For more information on investing with LakeView Asset Management, LLC call us at 702-749-9343 or request more information by clicking on the contact button on the top right-hand corner of the website or by emailing Scott at srothbort-lakeview@kingswoodus.com or Carly at crothbort-lakeview@kingswoodus.com. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ

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