Morning Note: Recession Risk Remains Low, But Still Not a Good (Equity) Market Setup Right Here...

While we're not due to perform our deep weekly economic dive till tomorrow, I thought I'd go ahead, with the help of Bespoke Investment Group, and highlight 3 not-small releases from yesterday.

1. The Fed's Beige Book. 

Here's from one of the more bearish economists out there (he believes we're already in recession):

"Beige Book – all you need to know: “Eight Districts reported that expectations of future growth among their contacts had diminished; contacts in three Districts specifically expressed concerns about a recession.”"

While I'm certainly not a bull on the economy presently, but neither am I a bear right here, I couldn't help it:

"Well, you probably "need to" consider this as well from the May Manuf ISM: "Fifteen manufacturing industries reported growth in May..." "The only industry reporting a decrease in May compared to April is Furniture & Related Products.""

Here's Bespoke:

The Bespoke Beige Book Index suffered its third-largest ever decline in June, topped only by collapses during the COVID shock and global financial crisis. 

While that’s sobering, the overall tone was still overwhelmingly positive and is consistent with roughly 3% YoY GDP growth. 

2. Job Openings and Labor Turnover Report (quoting Bespoke):

"Today’s JOLTS data showed more openings than expected in April and a modest upward revision to March data on top of that.

The rate at which companies are laying off or otherwise firing workers returned to a record low and remains at extremely low levels despite a modest increase in initial jobless claims since February of this year.

Similarly, hiring rates remain extremely strong; through April, at least, there’s little sign that the rate at which employers are adding workers has slowed substantially.

With unemployment low and falling but hiring remaining elevated, quits continue to run at a downright impressive pace.

Almost 3% of the labor force is quitting their job every month, while slowing demand for workers may eventually lead to a less favorable labor market for workers.

In the meantime, job openings remain extremely high relative to history, with a rate roughly 50% higher than the already-elevated pre-COVID levels."

3. The May ISM Manufacturing Survey

Direct from the report:

“All of the six biggest manufacturing industries — Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Petroleum & Coal Products; and Chemical Products — registered moderate-to-strong growth in May.

“Manufacturing performed well for the 24th straight month, with demand registering faster month-over-month growth and consumption softening due to labor force constraints. Overseas partners’ disruptions are beginning to impact U.S. manufacturing, creating a near-term headwind for factory output growth. Ten percent of panelists’ general comments expressed difficulty obtaining material from their Asian partners, which will impact reliable deliveries in the summer months..."

Fifteen manufacturing industries reported growth in May, in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Paper Products; Petroleum & Coal Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing; Primary Metals; and Electrical Equipment, Appliances & Components. The only industry reporting a decrease in May compared to April is Furniture & Related Products."

While, for sure, general conditions are anything but presently perfect, they simply are not recessionary, just yet... 

So, does that mean we're currently bullish on equities? Well, save for the latest counter-trend rally that we (per recent videos) essentially scoped out ahead of time in our technical analyses, no...

To give you a gist of how we view present equity market conditions; in a session yesterday afternoon where we were refining/updating our individual stock selection process, when Ryan asked for a time frame for him to deliver the requested data on a list of 22 names Nick and I are considering, I replied, "no hurry, this is still not a good market right here, but when it is we want to be ready to go with our best ideas."

I.e., there are forever silver linings (opportunities) amid all market setups... Well, for the patient investor, that is...

Asian equities struggled overnight, with 12 of the 16 markets we track closing lower.

Europe, on the other hand, is catching a bid this morning, with 17 of the 19 bourses we follow trading higher as I type.

US stocks are struggling for direction to start the session: Dow down 85 points (0.26%), SP500 down 0.33%, SP500 Equal Weight up 0.03%, Nasdaq down 0.47%, Nasdaq Comp down 0.41%, Russell 2000 up 0.27%.

The VIX sits at 26.10, up 1.60%.

Oil futures are up 0.74%, gold's up 1.05%, silver's up 1.74%, copper futures are up 4.59% and the ag complex (DBA) is up 0.91%.

The 10-year treasury is up (yield down) and the dollar is down 0.39%.

Among our 38 core positions (excluding cash and short-term bond ETF), 30 -- led by base metals futures, uranium miners, base metals miners, solar stocks and MP Materials -- are in the green so far this morning. The losers are being led healthcare stocks, AT&T, energy stocks, consumer staples stocks and tech stocks.

"...one’s ability to anticipate and deal well with the future depends on one’s understanding of the cause/ effect relationships that make things change, and one’s ability to understand these cause/ effect relationships comes from studying how they have changed in the past."

--Dalio, Ray. Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail  

Have a great day!
Marty