{"id":8142,"date":"2023-05-13T07:25:06","date_gmt":"2023-05-13T11:25:06","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/recession-watch-a-mild-recession-is-likely-starting-in-july-2023\/"},"modified":"2023-05-13T07:25:08","modified_gmt":"2023-05-13T11:25:08","slug":"recession-watch-a-mild-recession-is-likely-starting-in-july-2023","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=8142","title":{"rendered":"Recession Watch: A Mild Recession Is Likely Starting In July 2023"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture><\/picture><figcaption><\/figcaption><\/figure>\n<\/p>\n<p><em>This article was coproduced with Dividend Sensei.<\/em><\/p>\n<p>The goal of these Recession watch updates isn&#8217;t to help you time the market, because even perfect economic timing can&#8217;t do that.<\/p>\n<p><figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16667729518818426.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Charlie Bilello<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p>And even perfect economic timing isn&#8217;t enough to<span class=\"paywall-full-content invisible\"> beat buy-and-hold blue-chip investing over the long term.<\/span><\/p>\n<p class=\"paywall-full-content invisible\">Rather our goal is to help our members get the best &#8220;big picture&#8221; view of what&#8217;s going on with the economy, so they can avoid panic selling at the worst possible time.<\/p>\n<p class=\"paywall-full-content invisible\">That&#8217;s so you can profit from the incredible blue-chip bargains we have today and the better ones that might or might not be coming in the next few weeks and months.<\/p>\n<p class=\"paywall-full-content invisible\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16756805816212835.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Charlie Bilello<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible\">That way, you can harness the incredible income and wealth-compounding power of blue-chip dividend stocks to make your financial dreams come true.<\/p>\n<p class=\"paywall-full-content invisible\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835367803017426.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Charlie Bilello<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible\">We want to<span class=\"paywall-full-content invisible no-summary-bullets\"> help you stay calm and rational through the dark times, so you can enjoy the face-ripping bull market rally that&#8217;s likely starting at the end of 2023.<\/span><\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Recession Watch: A Mild Recession Is Likely Starting In July 2023<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">We&#8217;re in the process of getting a new video editor. Until then, I must paste the raw video files, and time stamps won&#8217;t be available.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure data-id=\"23561\" data-provider=\"Loom\"><iframe loading=\"lazy\" src=\"https:\/\/seekingalpha.com\/embed\/23561\" allowfullscreen=\"true\" width=\"640\" height=\"480\" data-original-width=\"640\" data-original-height=\"480\" data-id=\"23561\" data-provider=\"Loom\"><\/iframe><\/figure>\n<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Inflation Watch<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Inflation has been the #1 concern for over a year, and despite the banking turmoil and highest volatility in bond yields since 2009, it remains a top concern today.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683537561159308.png\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Cleveland Fed<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Cleveland Fed expects core Personal Consumption Expenditures, or PCE price index, the Fed&#8217;s official inflation gauge, to remain stuck at 4.7% at the end of June.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">It&#8217;s been 4.6% to 4.7% for the last 3 months.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">CPI (Consumer Price Index) inflation is expected to print 5.2% on Wed, May 10th, up from 5% in April.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Next month it&#8217;s expected to fall to 4.5%, but core CPI (ex-food and fuel) is expected to come in at 5.4%, down a bit from 5.6% in April.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Month-over-month is more important than Year-over-year and can tell you what inflation is running in real time.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Cleveland Fed expects core PCE to remain 0.4% (4.9% annualized) through the end of June.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">It expects core CPI to remain 0.45% or 5.5% annualized through June.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Super Core (services ex housing) inflation remains stuck at 5.5%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683537804295536.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Annualized super core inflation has remained around 5.5% since January 2021.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Why is inflation proving so stubborn?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835379094893312.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Charlie Bilello<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The U.S. jobs market is proving unsinkable so far, courtesy of a 1 million job shortage created by the Pandemic.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>all services jobs<\/li>\n<li>70% of service inflation is wage driven.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The latest jobs report showed 253K jobs created, compared to 180K expected.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Wage growth was expected to be 4.2% YOY and came in 4.4%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Non-supervisory wages (80% of workers) rose 4.8% YOY.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Month-over-month wage growth accelerated to 0.5%, or 6.3% annualized.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em><strong>That&#8217;s consistent with 4.8% long-term inflation, according to the Fed and Moody&#8217;s.<\/strong><\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">And guess what inflation appears stuck at? Around 5%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The only weakness in the jobs report was a 149,000 downward revision to the previous two months&#8217; reports.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>February from +326,000 to +248,000<\/li>\n<li>March from +236,000 to +165,000<\/li>\n<li>April 253,000 (first estimate).<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">That&#8217;s a three-month rolling average of 222,000 wage growth compared to 163,000 pre-pandemic when we were at 3.5% unemployment.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">65% of the economy is consumer spending, and wages drive 70% of consumer spending.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">As long as people keep their jobs and their wages are rising, they will keep spending.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The highest wage growth is in the lowest-earning industries, such as leisure and hospitality, where wage growth is running around 15% on an annualized basis.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>the lowest-income Americans are seeing the strongest wage growth<\/li>\n<li>and low-income households spend almost all of their income.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This is why the U.S. economy remains so resilient in the face of incredible headwinds.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Fed Watch<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Fed hiked to 5% last week, exactly as expected.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683538575089091.png\" alt=\"Daily Shot\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">And the Fed also changed its statement language to signal a conditional pause.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835386338840292.png\" alt=\"Daily Shot\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">If and only if core inflation is falling steadily is the Fed actually done.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835384617271929.png\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">CME Group<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The bond market is convinced a recession is imminent, and the Fed will cut three times this year.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Fed says it has no plans to cut this year, which the bond market thinks is a 0.4% probability.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The current data says the bond market is wrong and the Fed might hike once or twice more.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">In fact, Citigroup&#8217;s base-case is that the Fed will hike 25 in June, and 25 in July to 5.5% to 5.75%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Neel Kashkari, President of the Minneapolis Fed, thinks 5.5% is an appropriate terminal rate.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">St. Louis Fed President Bullard thinks if inflation remains stuck at these levels, the Fed might have to go to 6% to 7%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835390869930463.jpg\" alt=\"Federal Reserve Bank of St. Louis\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Federal Reserve Bank of St. Louis<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">And the actual economic data says the Fed isn&#8217;t restrictive, just maybe close to neutral.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835391353577533.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Atlanta Fed<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">What about the banking crisis? And QT (reverse money printing)? Doesn&#8217;t that effectively increase the Fed funds rate?<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>Goldman and JPMorgan estimate the regional banking crisis adds 0.5% to the Fed funds rate<\/li>\n<li>The Atlanta Fed estimates QT adds 0.75%<\/li>\n<li>San Francisco Fed estimates QT adds 2%.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">So effectively, the Fed funds rate is actually 6.25% to 7.25% right now, which means the Fed is right to pause&#8230;but not cut.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">This is what the Fed is trying to prevent.<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835392879512742.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">If the Fed pivots too early, as it did three times in the 1970s and twice in the early 1980s, it risks a double-top inflation scenario that could result in 11% to 12% inflation, double-digit Fed funds rate, and a severe recession that results in over 8 million job losses.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>and a 50% stock market crash<\/li>\n<li>and a lost decade for stocks.<\/li>\n<\/ul>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Financial Crisis Watch<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">JPMorgan Chase &amp; Co. (JPM) acquired last week First Republic Bank (OTCPK:FRCB) in a sweetheart deal in which:<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>JPM paid the FDIC $10.8 billion for FRC<\/li>\n<li>The government gave JPM a $50 billion line of credit<\/li>\n<li>and covered 80% of loan losses for the next five years<\/li>\n<li>JPM estimates it will make about $2.6 billion on the deal.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The FDIC saves about $13 billion on the deal, and FRC customers are protected from any deposit losses.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>FRC bond investors take a steep haircut<\/li>\n<li>FRC stock investors get wiped out.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">PacWest Bancorp (PACW) then triggered more market mayhem when, about 30 minutes after Jerome Powell said the banking system was safe, it plunged 55%.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>news that it&#8217;s looking to sell itself.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Is PACW the next SVB Financial Group (OTC:SIVBQ) or FRC? Yes and no.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Unlike SVB, which was 93% uninsured deposits, and FRC (67%), which mostly banked tech startups and rich people, PACW&#8217;s deposits are fine.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>average FRC checking account balance: $2 million<\/li>\n<li>average SVB checking account balance: $4.5 million.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">PACW&#8217;s deposits are 77% insured.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">And its liquidity is enough to cover 188% of its deposits.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>PACW is incapable of dying the way SVB or FRC did<\/li>\n<li>via bankrun on deposits.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">So, why is PACW looking to sell itself?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">PACW was founded in 1999 in Beverly Hills and is mostly focused on Los Angeles businesses.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">In 22 years, it generated $3 billion in cumulative profits.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">And then, in Q1, it lost $1.2 billion, an annualized rate of $5 billion.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">PACW&#8217;s issues aren&#8217;t bad loans (not yet at least) or a run on the bank by rich clients worried about losing their deposits.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">It&#8217;s due to the Fed hiking rates by 5% in just over a year and putting the bank&#8217;s business model underwater.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">At the current rate of losses, PACW will fail within six months.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Western Alliance Bancorporation (WAL) also triggered some drama last week. It fell as much as 62% in a day when the Financial Times reported it, too, was trying to sell itself.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>management came out and said this was 100% false.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">WAL is actually still profitable, and about 78% of deposits are insured.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Unlike PACW, it&#8217;s profitable. But Moody&#8217;s downgraded them two notches from BBB to BB+.<\/p>\n<blockquote class=\"paywall-full-content invisible no-summary-bullets\">\n<p>In order to reduce its now elevated reliance on higher-cost market funds, Western Alliance is in the midst of a material balance sheet repositioning that includes the disposition of significant loans and other assets. Favorably, management already completed $1.7 billion of sales in Q1 2023, which included $0.9 billion of loan sales, with the sale of securities and mortgage servicing rights accounting for the remainder. In addition, $6.0 billion of held-for-investment loans, about 12% of the year-end 2022 balance, were reclassified to held-for-sale in Q1 2023.<\/p>\n<p>In announcing its earnings on 18 April, management indicated that $3.0 billion of the held-for-sale loans are already contracted for sale and expected to close in Q2 2023, with a disposition of the remaining $3.0 billion earlier in the sales process. If successful, the additional loan sales will reduce Western Alliance&#8217;s use of market funding and strengthen its capital metrics.&#8221; &#8211; Moody&#8217;s.<\/p>\n<\/blockquote>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Moody&#8217;s is worried that asset sales at a loss could significantly weaken WAL&#8217;s capital buffers.<\/p>\n<blockquote class=\"paywall-full-content invisible no-summary-bullets\">\n<p>Western Alliance&#8217;s CRE portfolio accounted for 2.6 times Moody&#8217;s tangible common equity (TCE) as of 31 December 2022, which Moody&#8217;s views as a high concentration. The bank also has sizeable exposure to the riskier construction sector accounting for 0.8 times Moody&#8217;s TCE at year-end 2022.&#8221; &#8211; Moody&#8217;s.<\/p>\n<\/blockquote>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Moody&#8217;s is also worried about WAL&#8217;s high exposure to commercial real estate, which is the next shoe to drop in the banking crisis.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835405810402467.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">$500 billion in commercial mortgages are maturing in 2023 and the Fed says it will keep rates at 5% (at least).<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Much higher borrowing costs on the refinanced debt, combined with much higher vacancy rates for office properties, is why BX, BAM, and PGIM (Prudential&#8217;s asset management arm) have defaulted on some large office properties in Los Angeles.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The NYT estimates that a 10% to 20% default rate on commercial mortgages is possible in the coming recession (similar to the Great Recession).<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">That means $80 to $160 billion in loan losses for banks.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Regional banks are 67% of commercial real estate lending in the U.S., so around $80 billion in regional banking losses from real estate might be coming soon.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683540771443366.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Charlie Bilello<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">In the last year, the 143 largest regional banks had $62 billion in profits, so we&#8217;re potentially looking at a lot more bank failures in the coming months.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">How many? A study from Stanford estimates that just over 50% of U.S. banks are insolvent if they had to sell 100% of assets right now.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>about $620 billion in unrealized bond losses<\/li>\n<li>courtesy of the Fed requiring banks to buy bonds and then jacking up rates at the fastest rate in 42 years.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The good news is that only 10% of banks (about 414) are worse off than SVB in terms of financial strength.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The bad news is that Stanford estimates 191 regional banks remain high risk and could fail.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">On average, four banks per year fail, and banking consolidation has been a steady trend since 1980.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>When the Fed hiked to 20% contributed to the Savings and Loan crisis<\/li>\n<li>30% of SNLs failed over the next ten years<\/li>\n<li>no recession<\/li>\n<li>great stock market returns.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835410439189374.png\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Statista<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">In 1921, U.S. banks peaked at 31,000, and there was one bank for every 3,500 Americans.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Today there is one bank for every 80,500 Americans.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">For context, Canada, famous for its banking stability courtesy of a government-enforced oligopoly, has 32 banks and 2 credit unions.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>One bank for every 1.1 million people<\/li>\n<li>the U.S. has 13.5X more banks per capita than Canada.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">U.S. banks remain relatively less well-capitalized than many countries, but their capital buffers are 2X that of what they were at the start of the Great Recession.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">So, how worried should you be about the safety of your bank?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683541253255081.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">48% of Americans are worried about their deposits, more than during the Great Recession.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This is an overreaction created by scary headlines.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">The Regional Banking Crisis Is NOT A New Great Recession<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">First, let&#8217;s consider the size of the remaining banks at high risk of failing.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835413459708743.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Federal Reserve<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">FRC was the 14th largest bank in the country, and no larger banks are at risk of failing.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">First Citizens BancShares, Inc. (FCNCA) bought SVB because it is that strong of a bank.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><picture><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835414024585738.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/picture><figcaption>\n<p class=\"item-caption\">Bloomberg<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">All the other banks are so strong and large that the U.S. government asked them to rescue FRC with $30 billion in emergency deposits.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>They have all now gotten that back.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">What about PACW, which is potentially six months from being seized by the FDIC and sold to a stronger bank (most likely PNC)?<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>PACW has $41 billion in assets and is the 53rd-largest bank<\/li>\n<li>WAL is the 40th largest bank with $68 billion in assets.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Stanford estimates that about $300 billion in banking assets might still fail, though there are some much larger at risk banks according to Moody&#8217;s.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>Zions Bank is the 36th largest bank with $90 billion in assets<\/li>\n<li>Comerica is the 37th largest bank with $85 billion in assets<\/li>\n<li>the largest bank that MIGHT fail is KeyBank<\/li>\n<li>20th largest with $188 billion in assets.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">KEY isn&#8217;t on any high-risk watchlist from rating agencies, but is the largest bank that might fail if we get a worst-case scenario (severe recession).<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">JPMorgan has the financial capacity to conservatively acquire another $250 billion in failed banking assets if the US government asked them to.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>JPM is only allowed to buy more banks (that have deposits) at the request of the U.S. government<\/li>\n<li>it has 16% of U.S. deposits and requires a waiver from the Office of the Comptroller of the Currency<\/li>\n<li>as do any banks with 10+% of U.S. deposits.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">PNC was reported to be the #2 choice to buy FRC, and all of the remaining high-risk banks are ones that PNC or USB (also asked to bid) could acquire.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">As could Truist Financial Corporation (TFC), the 3rd super regional rescue bank the U.S. government called on to save FRC.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">In other words, the U.S. is likely to have a lot less banks in the future, but not necessarily due to spectacular collapses like SVB or FRC.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>if 1,000 banks get consolidated the U.S. will have 10X the banks per capita of Canada.<\/li>\n<li>if 2,000 banks get acquired the U.S. would have 5X the banks per capita of Canada.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The U.S. loves small, local banks, which is why we&#8217;ve had ten banking crises since 1792.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>9,000 failed in the Great Depression<\/li>\n<li>none failed in Canada.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Since 1929, there has been one bank failure in Canada&#8230;due to fraud, not banking weakness.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683542106055003.png\" alt=\"yCharts\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\"><span style=\"background-color: navy; color: white;\"><\/span>YCharts<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The St. Louis Financial Stress Index tracks 18 weekly financial metrics; zero is the average stress level since 1993.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835421865412326.png\" alt=\"yCharts\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\"><span style=\"background-color: navy; color: white;\"><\/span>YCharts<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The failure of 3 banks plus Credit Suisse within 11 days caused a share spike in financial stress&#8230;to historically average levels for a recession.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">And since then, financial stress has collapsed back to below-average levels.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683542251973624.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Emergency borrowing by banks from the Fed has been cut in half now that JPM has acquired FRC.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835423750435824.png\" alt=\"yCharts\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\"><span style=\"background-color: navy; color: white;\"><\/span>YCharts<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Chicago Fed has been tracking financial stress since 1971 using 105 weekly metrics. Zero is average financial stress, and we&#8217;re below average right now.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835425305509543.png\" alt=\"yCharts\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\"><span style=\"background-color: navy; color: white;\"><\/span>YCharts<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The credit and leverage subindexes indicate stress in the financial markets, including the shadow banking system.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">However, they remain at levels consistent with a mild recession at worst.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\"><strong>Kiyosaki Is Still A Crank That&#8217;s Safe To Ignore;)<\/strong><\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683542592165556.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Finbold<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Economy Watch: A Mild Recession Is Likely Starting In July<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835426957073405.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Soc Gen<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Conference Board&#8217;s leading economic index has never fallen at this rate over six months without a recession starting soon after.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835427588304322.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The 3m-10yr yield curve, the most accurate recession forecasting tool in history, has never been so inverted.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>Last week it hit -1.92%<\/li>\n<li>-1.79% on Monday, May 8th.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683542850828597.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">It&#8217;s the most anticipated recession in history.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>80% of Americans expect a recession<\/li>\n<li>96% of CEOs<\/li>\n<li>the Fed<\/li>\n<li>Warren Buffett<\/li>\n<li>the bond market (100% chance by October 2024).<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835433768280456.png\" alt=\"NY Fed\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">NY Fed<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The NY Fed estimates it&#8217;s the highest recession risk in 42 years. Never in history has risk been this high without a recession starting soon afterward.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">Behold The Mildest Expected Recession In History<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835429324675117.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Wells Fargo agrees with the Bloomberg consensus that the recession begins in July, lasts six months, and peaks at a 0.9% GDP contraction.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Full-year 2023 growth is expected to be +1.0%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">If economists are right (they always underestimate recession severity), it would be the mildest recession in history.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>the previous record -1% peak decline and -0.4% full-year growth in 2001<\/li>\n<li>the September 11th recession.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Here&#8217;s how mild the recession might be.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The Fed thinks unemployment will rise from 3.4% to 4.6%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Wells Fargo thinks 5.1% peak unemployment.<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>Since WWII, the average unemployment is 5.75%.<\/em><\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">The Economic Data Confirms A Mild Recession Is Most Likely To Begin In About 6 Weeks<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1683543545606351.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">David Rice<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Eighteen economic indicators say that a recession will likely start in July, confirming expectations from economists, the Fed, CEOs, Warren Buffett, and Americans in general.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">How will we confirm the recession?<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">National Bureau of Economic Research will likely tell us after it&#8217;s over.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Unemployment rises by 0.5% to 3.9% (Sahm rule).<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Yield curve un-inverts.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835438761547594.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Daily Shot<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Bottom Line: A Mild Recession Is Likely Starting In July<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The data confirms that:<\/p>\n<ol class=\"paywall-full-content invisible no-summary-bullets\">\n<li>A mild recession is likely starting in a few weeks<\/li>\n<li>it&#8217;s NOT a financial crisis<\/li>\n<li>the regional banking crisis is like the Savings and Loan crisis, NOT another Great Financial Crisis<\/li>\n<li>stocks are likely to have terrible few months.<\/li>\n<\/ol>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835439683368888.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Ben Carlson<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">S&amp;P Bear Market Bottom Scenarios<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Best Case<\/strong><\/p>\n<p> <span class=\"table-responsive paywall-full-content invisible no-summary-bullets\"><span class=\"table-scroll-wrapper\"><span data-intersection-boundary=\"start\"><\/span><\/p>\n<table>\n<colgroup>\n<col>\n<col>\n<col>\n<col>\n<col> <\/colgroup>\n<tr>\n<td><strong>Earnings Decline<\/strong><\/td>\n<td><strong>S&amp;P Trough Earnings<\/strong><\/td>\n<td><strong>Historical Trough PE Of 15 (upper end of the range)<\/strong><\/td>\n<td><strong>Decline From Current Level<\/strong><\/td>\n<td><strong>Peak Decline From Record Highs<\/strong><\/td>\n<\/tr>\n<tr>\n<td><strong>0%<\/strong><\/td>\n<td><strong>229<\/strong><\/td>\n<td><strong>3439<\/strong><\/td>\n<td><strong>16.9%<\/strong><\/td>\n<td><strong>-28.6%<\/strong><\/td>\n<\/tr>\n<tr>\n<td>5%<\/td>\n<td>218<\/td>\n<td>3267<\/td>\n<td>21.0%<\/td>\n<td>-32.2%<\/td>\n<\/tr>\n<tr>\n<td>10%<\/td>\n<td>206<\/td>\n<td>3095<\/td>\n<td>25.2%<\/td>\n<td>-35.8%<\/td>\n<\/tr>\n<tr>\n<td>13%<\/td>\n<td>199<\/td>\n<td>2992<\/td>\n<td>27.7%<\/td>\n<td>-37.9%<\/td>\n<\/tr>\n<tr>\n<td>15%<\/td>\n<td>195<\/td>\n<td>2923<\/td>\n<td>29.3%<\/td>\n<td>-39.3%<\/td>\n<\/tr>\n<tr>\n<td>20%<\/td>\n<td>183<\/td>\n<td>2751<\/td>\n<td>33.5%<\/td>\n<td>-42.9%<\/td>\n<\/tr>\n<\/table>\n<p> <span data-intersection-boundary=\"end\"><\/span><\/span><button class=\"table-enlarge-button\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewbox=\"0 0 16 16\" class=\"table-enlarge-icon\"><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\"><\/path><\/svg>Click to enlarge<\/button><\/span> <\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Base-Case<\/strong><\/p>\n<p> <span class=\"table-responsive paywall-full-content invisible no-summary-bullets\"><span class=\"table-scroll-wrapper\"><span data-intersection-boundary=\"start\"><\/span><\/p>\n<table>\n<colgroup>\n<col>\n<col>\n<col>\n<col>\n<col> <\/colgroup>\n<tr>\n<td><strong>Earnings Decline<\/strong><\/td>\n<td><strong>S&amp;P Trough Earnings<\/strong><\/td>\n<td><strong>Historical Trough PE Of 14 (historical mid-range)<\/strong><\/td>\n<td><strong>Decline From Current Level<\/strong><\/td>\n<td><strong>Peak Decline From Record Highs<\/strong><\/td>\n<\/tr>\n<tr>\n<td>0%<\/td>\n<td>229<\/td>\n<td>3210<\/td>\n<td>22.4%<\/td>\n<td>-33.4%<\/td>\n<\/tr>\n<tr>\n<td><strong>5%<\/strong><\/td>\n<td><strong>218<\/strong><\/td>\n<td><strong>3049<\/strong><\/td>\n<td><strong>26.3%<\/strong><\/td>\n<td><strong>-36.7%<\/strong><\/td>\n<\/tr>\n<tr>\n<td>10%<\/td>\n<td>206<\/td>\n<td>2889<\/td>\n<td>30.2%<\/td>\n<td>-40.1%<\/td>\n<\/tr>\n<tr>\n<td><strong>13% (average since WWII)<\/strong><\/td>\n<td><strong>199<\/strong><\/td>\n<td><strong>2793<\/strong><\/td>\n<td><strong>32.5%<\/strong><\/td>\n<td><strong>-42.1%<\/strong><\/td>\n<\/tr>\n<tr>\n<td>15%<\/td>\n<td>195<\/td>\n<td>2728<\/td>\n<td>34.0%<\/td>\n<td>-43.4%<\/td>\n<\/tr>\n<tr>\n<td>20%<\/td>\n<td>183<\/td>\n<td>2568<\/td>\n<td>37.9%<\/td>\n<td>-46.7%<\/td>\n<\/tr>\n<\/table>\n<p> <span data-intersection-boundary=\"end\"><\/span><\/span><button class=\"table-enlarge-button\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewbox=\"0 0 16 16\" class=\"table-enlarge-icon\"><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\"><\/path><\/svg>Click to enlarge<\/button><\/span> <\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Worst Case<\/strong><\/p>\n<p> <span class=\"table-responsive paywall-full-content invisible no-summary-bullets\"><span class=\"table-scroll-wrapper\"><span data-intersection-boundary=\"start\"><\/span><\/p>\n<table>\n<colgroup>\n<col>\n<col>\n<col>\n<col>\n<col> <\/colgroup>\n<tr>\n<td><strong>Earnings Decline<\/strong><\/td>\n<td><strong>S&amp;P Trough Earnings<\/strong><\/td>\n<td><strong>Historical Trough PE Of 15<\/strong><\/td>\n<td><strong>Decline From Current Level<\/strong><\/td>\n<td><strong>Peak Decline From Record Highs<\/strong><\/td>\n<\/tr>\n<tr>\n<td>0%<\/td>\n<td>229<\/td>\n<td>2981<\/td>\n<td>27.9%<\/td>\n<td>-38.1%<\/td>\n<\/tr>\n<tr>\n<td>5%<\/td>\n<td>218<\/td>\n<td>2832<\/td>\n<td>31.5%<\/td>\n<td>-41.2%<\/td>\n<\/tr>\n<tr>\n<td>10%<\/td>\n<td>206<\/td>\n<td>2683<\/td>\n<td>35.1%<\/td>\n<td>-44.3%<\/td>\n<\/tr>\n<tr>\n<td>13%<\/td>\n<td>199<\/td>\n<td>2593<\/td>\n<td>37.3%<\/td>\n<td>-46.2%<\/td>\n<\/tr>\n<tr>\n<td>15%<\/td>\n<td>195<\/td>\n<td>2533<\/td>\n<td>38.7%<\/td>\n<td>-47.4%<\/td>\n<\/tr>\n<tr>\n<td>20%<\/td>\n<td>183<\/td>\n<td>2384<\/td>\n<td>42.4%<\/td>\n<td>-50.5%<\/td>\n<\/tr>\n<tr>\n<td><strong>25% (Joint Economic Committee, 3 Month Debt Default Scenario) 5% probability<\/strong><\/td>\n<td><strong>172<\/strong><\/td>\n<td><strong>2235<\/strong><\/td>\n<td><strong>46.0%<\/strong><\/td>\n<td><strong>-53.6%<\/strong><\/td>\n<\/tr>\n<\/table>\n<p> <span data-intersection-boundary=\"end\"><\/span><\/span><button class=\"table-enlarge-button\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewbox=\"0 0 16 16\" class=\"table-enlarge-icon\"><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\"><\/path><\/svg>Click to enlarge<\/button><\/span> <\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Even in a mild recession where inflation keeps corporate profits from declining at all, stocks are likely to fall about 17%.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure\" contenteditable=\"false\"><picture><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-16835443051488674.jpg\" alt=\"x\" contenteditable=\"true\" loading=\"lazy\"><\/picture><figcaption>\n<p class=\"item-caption\">Treasury, Moody&#8217;s, JP Morgan, Goldman<\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">A 3-month debt default is the realistic worst-case scenario according to Moody&#8217;s and the Joint Economic Committee, and that&#8217;s a 5% probability.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>consistent with the bond market&#8217;s estimates<\/li>\n<li>2X the risk of nuclear war with Russia.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><strong>Why Worry About Bear Markets When You Can Have An Ultra SWAN Portfolio Like This?<\/strong><\/p>\n<p> <span class=\"table-responsive paywall-full-content invisible no-summary-bullets\"><span class=\"table-scroll-wrapper\"><span data-intersection-boundary=\"start\"><\/span><\/p>\n<table>\n<colgroup>\n<col>\n<col>\n<col>\n<col>\n<col> <\/colgroup>\n<tr>\n<td><strong>Bear Market<\/strong><\/td>\n<td><strong>ZEUS Income Growth<\/strong><\/td>\n<td><strong>60\/40<\/strong><\/td>\n<td><strong>S&amp;P<\/strong><\/td>\n<td><strong>Nasdaq<\/strong><\/td>\n<\/tr>\n<tr>\n<td>2022 Stagflation<\/td>\n<td>-11%<\/td>\n<td>-21%<\/td>\n<td>-28%<\/td>\n<td>-35%<\/td>\n<\/tr>\n<tr>\n<td>Pandemic Crash<\/td>\n<td>-10%<\/td>\n<td>-13%<\/td>\n<td>-34%<\/td>\n<td>-13%<\/td>\n<\/tr>\n<tr>\n<td>2018<\/td>\n<td>-13%<\/td>\n<td>-9%<\/td>\n<td>-21%<\/td>\n<td>-17%<\/td>\n<\/tr>\n<tr>\n<td>2011<\/td>\n<td>-1%<\/td>\n<td>-16%<\/td>\n<td>-22%<\/td>\n<td>-11%<\/td>\n<\/tr>\n<tr>\n<td>Great Recession<\/td>\n<td>-24%<\/td>\n<td>-44%<\/td>\n<td>-58%<\/td>\n<td>-59%<\/td>\n<\/tr>\n<tr>\n<td><em><strong>Average<\/strong><\/em><\/td>\n<td><em><strong>-12%<\/strong><\/em><\/td>\n<td><em><strong>-21%<\/strong><\/em><\/td>\n<td><em><strong>-33%<\/strong><\/em><\/td>\n<td><em><strong>-27%<\/strong><\/em><\/td>\n<\/tr>\n<tr>\n<td><em><strong>Median Decline<\/strong><\/em><\/td>\n<td><em><strong>-11%<\/strong><\/em><\/td>\n<td><em><strong>-16%<\/strong><\/em><\/td>\n<td><em><strong>-28%<\/strong><\/em><\/td>\n<td><em><strong>-17%<\/strong><\/em><\/td>\n<\/tr>\n<\/table>\n<p> <span data-intersection-boundary=\"end\"><\/span><\/span><button class=\"table-enlarge-button\"><svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewbox=\"0 0 16 16\" class=\"table-enlarge-icon\"><path fill-rule=\"evenodd\" clip-rule=\"evenodd\" d=\"M16 11a5 5 0 0 1-5 5H5a5 5 0 0 1-5-5V5a5 5 0 0 1 5-5h6a5 5 0 0 1 5 5v6zm-4.5-2.5h2v-6h-6v2h4v4zm-9-1h2v4h4v2h-6v-6z\"><\/path><\/svg>Click to enlarge<\/button><\/span> <\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><em>(Source: Charlie Bilello, <span style=\"background-color: navy; color: white;\"><\/span>YCharts, Portfolio Visualizer Premium.)<\/em><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Even in the worst-case scenario, a 54% market crash caused by a 3-month debt default, diversified portfolios like what DK has been teaching our subscribers to build are likely to remain safe.<\/p>\n<ul class=\"paywall-full-content invisible no-summary-bullets\">\n<li>dividends remain safe and growing<\/li>\n<li>19% peak decline for ZEUS income growth in a 54% market crash<\/li>\n<li>rebalance bonds and managed futures into blue-chips at the best valuations in years\/decades\/ever.<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible no-summary-bullets\">That&#8217;s what we do at DK and iREIT. We&#8217;re not just a stock picking service but world-class analysts who teach you how to be a better investor and build optimal sleep-well-at-night dream portfolios perfect for your needs.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/05\/47572571-1675688113601105_origin.jpg\" alt=\"\" loading=\"lazy\"><\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Source: Imgflip<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4603864-recession-watch-a-mild-recession-is-likely-starting-in-july-2023?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article was coproduced with Dividend Sensei. The goal of these Recession watch updates isn&#8217;t to help you time the market, because even perfect economic timing can&#8217;t do that. Charlie Bilello And even perfect economic timing isn&#8217;t enough to beat buy-and-hold blue-chip investing over the long term. Rather our goal is to help our members [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8143,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-8142","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Recession Watch: A Mild Recession Is Likely Starting In July 2023 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"This article was coproduced with Dividend Sensei. 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