Some basic economic readings continue to push forward that would cast doubt on recession calls. Maybe we just see sluggish to no growth for a while and not an actual recession?
Q4 2022 hedge fund letters, conferences and more
“Davidson” submits:
The Trucking Tonnage Index rises In the February report. There is strong correlation with Retail Sales even though they do not necessarily track each other monthly. With rising employment and personal income rising, this is another positive indicator. Employment and personal income remain below their pre-COVID trends. Couple this information with continued high Job Openings and many core industrial companies raising guidance indicating they are hiring and the picture of economic strength is reinforced. Markets reflect strength in basic industry vs weakness in COVID-favored names.
The headlines have been hot and cold on basic industry as they continue to promote the over-priced growth companies now exhibiting a steady stream of layoffs. Many advisors have said there is no economy without the growth companies. In my opinion, these companies would not exist without businesses supplying basic goods and services. This disconnect continues to supply opportunities to investors who see the differences in market pricing.
The recommendation continues to favor industrial and energy related companies, goods transport, packaging and etc. This represents roughly 80% of the Russell 3000 Index members, In the same vein, investors should avoid fixed income as inflation continues to press upon investor perceptions. Inflation could range 4%-5% for 10yrs and decimate returns for longer-maturity fixed income holdings. If there is a reduction In government spending and regulations the next few years, then inflation will not be as prolonged as projected. With politics, nothing is certain.
