 | The Ever-Approaching Recession by: Charles Sizemore | Chief Editor, The Banyan Edge
January 28, 2023 Banyan Nation,
We’ve been warning about a recession for weeks… and it’s still likely we see one this year.
But for the time being, it seems the economy is humming along just fine.
It was another big week for economic data, so let’s unpack it.
Adjusted for inflation, the economy grew at 2.9% in the final quarter of 2022. That’s a hair lower than the 3.2% we saw in the third quarter, but it’s better than most economists expected.  Now, the devil is in the details. It always is. And getting a little more granular, we see that it’s not all rosy.
Both imports and exports were down, supporting Ian’s view that globalization is going into reverse.
Government spending also contributed to the growth, and no one in their right mind would consider a spike in government spending a strong indicator of economic health.
And fixed investment – which includes everything from machinery to residential homes – was also down pretty sharply. So, there is clearly some weakness that isn’t being reflected in the headline number.
Still, it’s nice to get good news. And for the moment, the market seems to be interpreting it that way. Though we still have a handful of trading days left in the month, all major indices are up strongly in January.
We’ll see what February has in store. And I know that, come what may, the Banyan Team is ready.
Speaking about that, I’ll be sitting down with Charles Mizrahi in the Banyan Edge Podcast on Monday to hear how Charles separates the winners from the losers in any kind of market. Be sure to tune in!
Let’s now take a look at what the rest of the team is saying this week… - “Is the Federal Reserve Engineering a Recession?” by Ian King.
According to Ian, the Federal Reserve is running a con game.
By more than doubling their balance sheet during the pandemic, the Fed helped to ignite the inflation we face today. And fixing the problem — the one they created — hasn’t been easy.
The economy remains strong… which makes slaying the inflation beast harder. And it’s also why the Fed is trying to engineer a recession.
Recession or not, we have portfolios to run, and Ian breaks down his 2023 recession survival guide and tells you exactly how to allocate your portfolio this year.
- “The Bear Market Will End: Here’s How to Reward Your Future Self,” by Charles Mizrahi.
Charles isn’t a market timer. He’s not going to tell you when the bear market will end. But there is no question in his mind that it will.
The key to surviving and keeping the proper temperament in the meantime is remembering the stocks aren’t just blips on a screen or series of random letters making up a ticker symbol. They are pieces of real-world businesses. Volatility comes and goes, but good businesses last.
Charles breaks down his process, which he dubs his “Alpha-3 Approach,” right here.
- “Big Tech Has a Big Earnings Problem,” by Michael Carr.
It’s looking rough in technology. Alphabet, Google’s parent company, may see its profits drop 21%, while Facebook parent Meta could see its profits drop by 40% or more.
That’s brutal, and it makes valuations look questionable. High prices are sustained by high and rising profits, but as earnings drop, stock prices fall … as prices fall, investors panic … as investors panic, stock prices fall even more.
As more tech earnings come in, investors will reevaluate their positions. But that’s perfectly fine. You don’t have to lose money just because the tech sector is. In fact, Mike shows you how to actually profit from the shakeout!
- “My ‘Unpatriotic’ Investing Plan” by Adam O'Dell.
Adam is an American through and through. But he’s also a sharp investor. And he knows that one of the biggest blockades to profit opportunities is one’s “home country bias.”
American investors highly prefer investing in American stocks. As do Australian, Canadian, and Japanese people.
But once you learn that foreign stocks can and do outperform U.S. stocks on a fairly regular basis, you might want to set your biases aside and see what Adam’s found on the other side of the pond.
That’s going to wrap it up. But before I go, an important reminder to join me on the Banyan Edge Podcast Monday for my chat with Charles Mizrahi.
If you want to invest in a way that allows you to sleep soundly at night, you’re want to hear what Charles has to say. He’s invested through every bear market since 1987, and I don’t believe I’ve ever seen the man sweat. You’ll find out exactly why on Monday.
And if you have questions for Charles and I, please don’t hesitate to write them to BanyanEdge@BanyanHill.com.
Until next week,
Charles Sizemore
Chief Editor, The Banyan Edge
P.S. Thank you, as always, for reading and giving us your feedback.
Remember that you can do that anytime, including any questions you’d like us to answer on the podcast, by emailing us at BanyanEdge@BanyanHill.com.
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