The majority of Americans believe that we are already in a recession, and have thought so for quite some time. YouGov is a leading global public opinion and data company that conducts surveys on a wide range of topics, including politics, consumer behavior, and social issues. The results of their surveys can provide insights into the opinions and attitudes of the general population.

YouGov conducts a weekly survey of 1,500 adult US citizens and polls the percentage of Americans who believe we are currently in a recession. The chart below illustrates that many think we are already living it.

The key data point that contradicts a current recession and the one which hasn’t budged is the unemployment rate that still sits at just 3.4%. The Federal Reserve has raised rates 4.5% since the beginning of this hiking cycle, with more expected to come, and rolled off $600 billion on its balance sheet. Certain areas of the economy, namely technology and housing, have shown weakness from this tightening cycle that ensued layoffs, but the rest of the economy has not seen the same effects yet. The concern is if the lag effect of rate hikes will ultimately push us into a recession especially as we continue to raise rates, but currently the unemployment data as stood firm against these increases.

Proposed Social Security Changes

Social Security reform talks have gained transaction lately. Lawmakers are hashing out plans to address the shortfall that the program will face in the coming decades. After the spike of inflation in 2022, social security benefits increased by 8.7% for recipients in 2023. While this issue has been spoken about for years, discussions are heating up once again on ways to combat this problem.

Some of the potential changes that are being considered are raising the full retirement age to 70 as opposed to the current rule that ranges from 66-67, depending on your date of birth. Another proposal is to increase the payroll tax percentage in addition with the amount of income that is subject to this tax. Lastly, politicians are lobbying for the creation of a sovereign wealth fund that could allow social security funds to be invested in stocks and other assets. Right now, the assets are invested in special issue U.S. Treasury bonds that haven’t seen meaningful yield over the last decade.

According to the Social Security Board of Trustees, the program’s trust funds will become depleted by 2035, at which point there will only be enough revenue to pay about 76% of scheduled benefits. This means that without changes to the program, recipients may see a reduction in benefits starting in 2035. Reform is expected to take place prior to those events occurring and we will continue to monitor those updates as they come.

The Importance of S&P 500 200-Day Moving Average

The S&P 500 200-day moving average is a technical indicator that is widely used by traders and investors to help gauge the long-term trend of the stock market. The 200-day moving average is simply the average price of the S&P 500 over the past 200 trading days. This moving average is often seen as a critical level of support or resistance that can help traders and investors make decisions about when to buy or sell stocks.

When the S&P 500 is trading above its 200-day moving average, it is generally considered to be in an uptrend, and traders and investors may be more inclined to buy stocks. Conversely, when the S&P 500 is trading below its 200-day moving average, it is considered to be in a downtrend, and traders and investors may be more inclined to sell stocks.

From the chart above, the SP 500 broke above its 200-day moving average towards the end of January. After some recent market volatility, last week ended on a positive note as the SP 500 fought off dropping below that line.

Technical analysis can be a useful tool when assessing current trends and just one of many factors we look at when evaluating current positioning. The market flashed another positive technical sign in early February that still holds today, which is the “golden cross”. This occurs when the 50-day moving average moves above the 200-day moving average.

On 2/2/2023, the SP 500 triggered its 49th golden cross since 1928. Why is this important? The 260-day average return after a golden cross occurs is up 68.8% of the time with an average return of 9.7%. While past performance is not indicative of future performance, it is always helpful to use history as a guide when making investing decisions.

Articles We’re Reading

Rising China demand and constrained global supply raise specter of $100/barrel oil in H2 (Bloomberg)

Tesla recalling several thousand Model Y cars on fears of loose bolts (Reuters)

Credit cards using perks to lure new customers while many struggling to make payments (Axios)

Nvidia’s plans to sell technology to China’s Huawei could be at risk from possible tighter US government restrictions (Reuters)

Market Snapshot

For the Month Ending 2/28/2023 (Cumulative Returns)1

1Source – Morningstar, Inc. Corporate Bonds is presented as the iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds is presented as the iShares National Municipal Bond ETF. High Yield Bonds is presented as the iShares iBoxx $ High Yield Corporate Bond ETF. 10 Year Treasury refers to the valuation of a 10 Year Treasury Note, a debt obligation issued by the U.S. Department of the Treasury. Fed Funds Target represents upper limit of the federal funds target range established by the Federal Open Market Committee. Inflation Rate provided for the purposes of this report by the U.S. Bureau of Labor Statistics. Unemployment Rate calculated by the U.S. Bureau of Labor Statistics. WTI Crude Oil refers to the price of a barrel of West Texas Intermediate NYMEX) Crude Oil. Gold – Spot Price relates to the valuation of an ounce of gold, as traded on the NYSE Arca Exchange. U.S. Dollar refers to the U.S. Dollar Index (DXY). All Returns are denominated in USD (United States Dollar), unless otherwise explicitly noted.

Did You Know?

One of the most popular holidays celebrated in the month of March is St. Patrick’s Day. The first St. Patrick’s Day was celebrated in Ireland in the early 17th century. St. Patrick’s Day is a religious holiday that commemorates the patron saint of Ireland, St. Patrick, who is believed to have died on March 17th in the 5th century.

The first St. Patrick’s Day parade is believed to have taken place in New York City in 1762, organized by Irish soldiers serving in the British army. Today, St. Patrick’s Day is celebrated not only in Ireland but also in many other countries around the world with large Irish communities.

Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser

The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. Diversification does not ensure a profit or guarantee against a loss. There is no assurance that any investment strategy will be successful. Investing involves risk and you may incur a profit or a loss.