Global Semiconductor Sales Signal A Recession In 6 Months

As you can see in the chart below, the utilities sector is nearly above the red section which signals they are very overbought. 

They are about as overbought as they were in mid-December right before they fell almost 10%. The utilities sector has been strong because inflation estimates are falling. That is pulling down treasury yields. 

The 2-year yield is only 6 basis points higher than the Fed funds rate. If the yield curve inverts, utilities could get even more capital because the risk-off trade will be in play as investors start to expect a recession. Even with this slowdown occurring, I don’t see a recession in 2019.

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Global Semiconductor Sales - Semiconductors In Danger

Global semiconductor earnings revisions are the worst out of any sector or sub-sector. 

As you can see from the chart below, quarter over quarter global semiconductor sales are down about 10%. That decline would be the largest one outside of a recession/right after a recession in over 20 years if we aren’t in a recession now. While this seems like a full proof way of predicting a recession in the next 6 months, I don’t believe it. 

One industry doesn’t control the economy. I’d need to see jobless claims spike, the yield curve invert, the ISM non-manufacturing index contract, and the ECRI leading index hit new yearly growth cycle lows before I am on board with the concept of a recession happening this year.  

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Global Semiconductor Sales - Passive Investing Is Gaining Steam

Passive investing is the smartest choice for most investors because mutual funds often underperform. I’d caution against putting all your money into the S&P 500 even though those firms have international exposure as that is a bet on America. 

The idea of passive investing is to be highly diversified, so you aren’t making big bets. The main bet passive investors have is the global economy won’t have an Earth-shattering change which halts global markets. Individual economies and global economies recover from recessions. 

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