- The Recession that Wasn’t is Now Over By late summer of 2022 the U.S
- GDP contracted for the second straight quarter, marking the beginning of the most recent recession
- Except, […]
The Recession that Wasn’t is Now Over
By late summer of 2022 the U.S. GDP contracted for the second straight quarter, marking the beginning of the most recent recession. Except, we were told by those who were sure they knew better than anyone, that it wasn’t really a recession because jobs were expanding.
Okie Dokie then.
The inverted yield curve, it seemed, didn’t really matter at all. No need to fear interest rate policy. The Fed knows precisely what it is doing and will ease us into a soft landing.
Color me skeptical that it really went that way, but the reality is it surely could have been so much worse. It may still be.
However if this chart has any connection to meaningful information, then perhaps there has been a recession going on, and we simply didn’t realize it. If so, there is good news today: it’s over.
The ISM Manufacturing PMI number came in Monday morning far exceeding expectations. The chart shows that manufacturing has been in the doldrums ever since the GDP last shrunk, but only now has unexpectedly popped up to say hello.
This would seem to portend great news for the economy. Investors tiptoed into buying as if worried about spoiling the mood. Overall, index prices seem poised to rise.
Apple and Google lead Mag
When indexes rise, the leading components of those indexes should be bellwether growth companies if the market can be expected to continue higher. At least so goes the conventional wisdom. Would Apple (AAPL) and Alphabet (GOOG) be sufficient candidates for market leaders?
Apple certainly fits the bill as a manufacturing company, and while Alphabet is still largely considered a search-engine driven ad company, the reality is that they have dipped their hand deeply into the manufacturing arena, competing with AI technologies of their own.
It is telling that Apple rose the strongest of the MAG 7 stocks, and Google rose to all-time highs. That is exactly what momentum in growth stocks look like when it wants to signal a new trend breaking higher.
Twist on Profit Margins
One out-of-the-way item of news that underscores the market’s willingness to reconsider its recent selling ways comes from a biotech company that reported earnings before the bell on Monday.
Twist Biosciences reported that its top-line numbers were 1.78% better than expected. Doesn’t that make you want to pay 14% more for the stock than yesterday?
Just ignore the idea that the company lost more money than expected, expanding profit margins in the wrong direction, or that it had no significant new product announcements. Just focus on the fact that the company is using AI as part of its research.
Doesn’t it make your spine tingle thinking about the possibilities?
When markets show overly strong optimism in the face of worrisome data, you know that buyers are still out there looking to see prices rise. For better or worse, it might be time to figure out how to ride this new wave higher.
Gordon Scott, CMT is a former managing director of the CMT Association and a current member of the Investopedia Financial Review board. He has over 20 years of experience as a coach and trader in securities, futures, forex, and penny stocks. He is a co-founder of Edge Finder. Learn more at https://myedgefinder.com/.
Shared content and posted charts are intended to be used for informational and educational purposes only. CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. CMT Association does not accept liability for any financial loss or damage our audience may incur.
