So, it’s finally here. The stock and bond markets have predicted this recession for some time now. With the second sequential quarter of negative growth, it is now confirmed. Interestingly, some politicians and even economists have been trying to change the definition of what constitutes a recession. If you don’t like the answer, redefine the parameters? Predictable, but not helpful.

As the Bull has written several times over the past few weeks, this recession should not be feared. It will mostly be an inventory correction. There is always the possibility it gets out of hand, but not likely. The good news is that it takes some pressure off price increases. The bond market has been sniffing out that the Federal Reserve will not need to tighten nearly as much as had been initially feared. That is why interest rates have leveled off or even slightly declined.

Investors remember the great recession after the 2007 – 2009 financial crisis. This one has no comparison to that. Do not expect large unemployment increases. Companies that have had such a difficult time finding workers are not going to easily shed what they have. There are pockets of pain, but many sectors will be just fine. Unfortunately, this is a time when the rich get richer, and the poor get poorer; the strong become stronger and the weak weaker. This is basic to our human experience. Follow that principle through to any investment analysis, and it will be a good guide. Stay steady my friends.

El Toro Solo