The last couple of months have felt reminiscent of 2022. Since the end of July long-term treasuries have delivered a return of -14.20%, while the S&P 500 has returned -7.69%. Downward momentum has yet to abate, as the technical picture for stocks continues to deteriorate and yields have hit 10-year highs. This sets up tough choices in asset allocation, but we believe presents advantages for tactical strategies.
Macroeconomic Outlook
The US economy is on a knife-edge where weaker growth could tip it into recession while stronger growth could trigger a second wave of inflation. Both outcomes will lead to a recession. But this likely will not happen until the second half of 2024. While the economy has held up past many expectations, a look at the history of recent decades shows that such long and variable lags between policy tightening triggering a recession signal and the recession’s actual arrival is typically longer than 12 months. In other words, just because a US recession has not yet materialized does not mean that one will not strike in the next 12 months.
Click here to read the full Donoghue Forlines Markets in Motion Commentary.
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