In fact, if you look at every bear market since 1940, once you hit that bear market territory, which is -20% in the S&P 500 [Index], initially the markets go down further, another 15. And it's going to be important to see whether or not we can have the follow-through on the weak CPI print that you saw from October, which was the best piece of news that you've seen on the inflation front really in over a year. Once again, today's guest was Jeff Schulze, the architect of the Anatomy of a Recession program from ClearBridge Investments. Happy New Year and thank you for joining us today. It's usually the last domino to fall or turn red as a recession is starting. This announcement that the recession had come to an end likely came as little surprise to followers of the ClearBridge Anatomy of a Recession program, with the ClearBridge Recovery Dashboard flashing an overall green expansionary signal 14 months ago. So, we think that the shot clock for this recession has started. So clearly, the job is not done. But I firmly believe that it may ultimately be the Achilles heel of this recovery, because the Fed may have to push harder in order to get its slack and slower wage growth and potentially lower inflation. The Anatomy of a Recession (AOR) program is designed to help you stay on top of the business cycle and provide thoughtful insights through our exclusive risk and recovery dashboards. So, did that actually happen? Can you provide some insight?
In our opinion; this creates a higher probability of a recession than consensus is appreciating. And what the Fed is signalling is that they're going to do more rate hikes this year, and they are projecting over 1. So it's one of, was one of four signals that weren't red yet. But we're nowhere close to a red signal with initial jobless claims with the latest release. I believe this week there were some important employment numbers released. But I think we are reaching a point where it's good to start thinking about allocating money into equities as we try to anticipate the recovery that may take place in later 2023 and early 2024. Three of those tightening cycles did not end in a recession. Webinar: Anatomy of a Recession – What To Look For And Where We're Headed. Visit our website to learn more and view other upcoming events. Based on the four-year presidential cycle. But this is very different compared to the Fed's usual reaction function.
And if you look at every bear market since 1940, if you had bought the day you went into bear market territory, yes, the markets go down another 15% in general. Jeff Schulze: That is very true today. So in each of those instances, the Fed cut rates in order to prolong those expansions. And the deepest that you've seen the decline there before recession hit was -5. Franklin Templeton, ClearBridge Investments and its representatives are not affiliated with Ameriprise Financial. We hear how business fundamentals and valuations look right now. But if you look at other facets of the economy, you're seeing some pretty broad-based weakness. And usually when you've seen an increase of 10% or more on a year-over-year basis, the recession has officially begun. So the Fed recognizes this. Equities have delivered solid performance through these expansions, with regular bouts of volatility serving as healthy catalysts to extend bull markets. Volatility dominated equity and fixed income markets to start 2022. I think it would maybe stave off a recession potentially. Jeff Schulze: Like any tool, the ClearBridge Recession Risk Dashboard has its strengths and its weaknesses.
You also need to look at how many more hours somebody's worked this week than last week. Market Volatility: Will it Last? 8% at the time of pivot. Bond prices generally move in the opposite direction of interest rates. Host: When you're thinking about investing new money or potentially reallocating, are there types of companies that you would want to focus on and maybe target to play some defense? Host: Welcome, Jeff, and thank you for joining us today.
What's changed over the last four months is the number of firms planning to raise prices has plummeted. FT accepts no liability whatsoever for any loss arising from the use of this information and reliance upon the comments, opinions, and analyses in the material is at the sole discretion of the user. Usually, Q4 of year two of a presidential cycle starts off this seasonality, but that follows through to strong performance in Q1 and Q2 of year three. And the third really comes back to companies.
Disclosure: Franklin Templeton. So in looking at inflation, you can look at core measures of trimmed mean, you can look at median inflation or just core CPI, but all suggest that inflation remains stickier than the Fed would like. Please plan to call the toll-free number to hear the speaker and join the WebEx event online to view the slides using the login details. Past performance is no guarantee of future results. Jeff Schulze: Yeah, I think you need to take this opportunity to start dollar cost averaging into the market. Data as of September 30, 2022. The last four expansions, for example, have lasted 103 months on average (slightly over 8. It just continues to be a story about labor market as the last domino to fall. And the first is that there were unrealistic expectations of a dovish [US Federal Reserve] Fed pivot. Equity markets have been roaring with the S&P 500 and the NASDAQ indexes up approximately eight and 15%, respectively, year to date. That's why I think we're going to see a choppy environment with equities, because the data is going to be inconsistent as the lagged effects of monetary tightening bump up into a pretty resilient consumer and resilient spending. Internal Sales Desk: (888) 225-4250.
Jamner said the dashboard uses a stoplight analogy to indicate how things stand. And this is really important because the NAHB actually leads the unemployment rate by 12 months, which would suggest a lot more people laid off as we move into 2023. Is that your view currently? But nonetheless, profit margins have turned to red, and it does bring us potentially closer to a reduction of headcount as we move into next year. This article was written by. The markets have been reacting positively for quite some time. And Powell basically said that it's a very plausible scenario. But in looking at some of the more leading mechanisms of being able to determine shelter inflation, they've all rolled over pretty hard, whether it's Zillow, whether it's Apartment List, or it's just home prices nationally speaking. Markets tend to be forward looking. And I think, more importantly, that comes the day before we get the next FOMC meeting for December, which is obviously going to set the stage for the path for the Fed and whether or not they need to do more to feel comfortable bringing inflation down to target. So, what we're going to be anticipating over the next three to four months is an increase of average hourly earnings as a lot of workers renegotiate their wages for cost-of-living adjustments due to the high inflation that we saw last year. © 2023 Franklin Templeton Location: San Mateo, CA.
But that area is only about 11% of total employment, and this is typically a lower-paying sector. Sonal Desai, Chief Investment Officer of Franklin Templeton Fixed Income, and John Bellows, a Portfolio Manager at Western Asset, join the head... It's still green at the moment. Clear Bridge Investments, a special investment manager of Franklin Templeton, will be discussing the following: - The current state of the economy. Host: Jeff, this is a big week in American politics with elections taking place. And the largest of these counter-trend rallies was over 20% in each case, and the longest lasted 101 trading days or four and a half months. And with consumer balance sheets in the best shape in decades, consumer spending may be more resilient than forecasted as consumers get a boost in purchasing power on the back of lower energy prices and lower inflation, especially if wages stay sticky to the upside. Home sales also seem to grabbing a lot of headlines of late as well. Do you still feel like a recession is forthcoming in '23? And as a reminder, initial jobless claims is in the Recession Risk Dashboard, usually the last domino to turn red, confirming that a recession has started. Although we think that there's going to be a period of choppiness and maybe some more downward pressure as earnings expectations move lower, we're entering a very strong time of the year from a seasonality perspective.
Talking about it all is Ben Barber, Director of Municipal Bonds with Franklin Templeton Fixed Income, and Josh Greco of Franklin Templeton Investment Solutions. So, things are cooling, but they're not cooling enough for the Fed to feel comfortable that wages are coming down, inflation is going back to trend. The U. S. and the world will eventually move to the endemic stage of the disease, once enough people have immunity to it, and its impact on the economy will diminish. Can you tell us why that's so important to investors today?