Now we have the worst number in 10 years!

December 4, 2019

At the beginning of October, I pointed out the sensationalism of the financial media when they pointed out how the ISM Manufacturing Index posted the worst number in 10 years. It was only 0.2 lower than the previous 10 year low. After a rebound in October, the ISM Manufacturing Index took a decidedly negative turn in November. Worse, the internal components all weakened in November, with both New Orders and the Order Backlog falling to new lows for this expansion.

 "But we're a service economy" many people argue. First, the reason the ISM Manufacturing Index is such a key leading indicator is its ability to show the true underlying strength of our economy. If things are going great, we're going to see orders for big ticket items increase which is not only good for economic growth, but also a sign of continued confidence in the expansion. When the opposite occurs it is a concern. Second, another key leading indicator, the Non-Manufacturing Business Activity Index also posted its lowest reading of the expansion (albeit just by a few tenths of a percent).

Combined, these two things along with increases in interest rates, stress at the banks that was so bad it led to the Fed launching a QE program that they are not calling QE, continued weakness in employment growth, and a valuation of the stock market that will make it tough to generate any sort of decent returns, we are not as optimistic as the "experts" seem to be as they dust off their crystal balls.

 

Our economic model remains as it has all year --- bearish. This doesn't mean a recession is imminent, but it does mean the environment for risky assets is likely only going to get more difficult.

As I said back in early October, I can't help but notice the dates of the previous lows in both the Manufacturing and Non-Manufacturing indexes corresponding with the "bottom" in the economic slowdown. Rather than guessing about whether or not this is the bottom we'll do what we always do -- let the models dictate our investment allocations using the data, not the opinions of any member of the SEM investment team (or financial 'experts').

Please reload

Featured Posts

Investment Grade Junk

September 11, 2019

1/10
Please reload

Recent Posts

December 10, 2019

November 25, 2019

November 13, 2019

November 6, 2019

Please reload

Connect
  • LinkedIn Social Icon
  • Twitter Social Icon
  • Facebook Social Icon
  • RSS Social Icon

Related Posts

Please reload

This site is for INFORMATIONAL PURPOSES ONLY.  The comments and posts published in the SEM Trader's Blog ARE NOT investment recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.  CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute

Investing in the stock or bond markets involves risk and may not be suitable for all investors. Before making any investment decisions you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists you could sustain a loss of some or all of your initial investment and therefore you should not invest money you cannot afford to lose. You should be aware of all the risks associated with your investments and seek advice from an independent financial advisor if you have any doubts. All investments involve risk including those managed by SEM Wealth Management.

Opinions expressed at www.stratequity.com, www.semwealth.com and semtradersblog.com or the previous Trader's Blog site are those of the individual authors and do not necessarily represent the opinion of SEM Wealth Management or its management. Any opinions, news, research, analysis, prices or other information contained on this website, by SEM, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. SEM will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

 

The use of this website constitutes acceptance of our user agreement. Past performance is NOT indicative of future results.

***Anywhere performance of SEM's Investment Models is used, please refer to our Performance Snapshot  which contains details of the performance calculations for each of our investment models.***

 

There is no representation made as to the future results of SEM’s programs or if they will be profitable.

For additional information on the author and SEM Wealth Management, please see our DISCLOSURE DOCUMENT (ADV Part 2).