October 19 2018

Recession? WTF!

Recession? WTF! When polled about the likelihood of a recession, 85% agree that it is coming. While it is interesting in itself to see that this percentage has been rising, it doesn’t tell much about when the pull-back will hit us. So, we’re on the hunt for last straws that may break the bull market’s back.

Is Khashoggi the new Archduke Franz Ferdinand? Well, as much as he is a martyr hero standing up for free speech, he will still be forgotten. At best, we could hope his case could be used for leverage in opening up to more democracy.

In reality, he would sadly just be another bargaining chip for more trades. While the tipping point is hard to predict, barring an all-out international war, ingredients of a recession are usually the same: long-extended bull market (tick), consumer over-confidence (tick), rising rates (tick), widening wealth gap (tick), large failure in the economy (#student debt, #retail-delinquencies, tick), pull-back of regulation (US are undermining institutions both at home and abroad, tick). Last but not least, panic should spread quickly.

So far, we see none of that panic. Quite the contrary, investors seem to pull back in order from over-valued sectors, and over-played themes, taking benefit from cash-like bets. One thing is sure though, is that the social network machine has become frighteningly efficient at forging dramatic headlines and spreading them like wildfire. If we had to bet, social media and the misinformation it conveys will be a key component of the suddenness of the next recession. Keep calm and carry on.

360 Advisory – Markets