Market Notebook

by | Nov 7, 2021

Discussion – 

Similar to last week, both equities, as measured by SPY, and bonds, as measured by BND, posted gains. Equities moved to new highs while bond prices closed near the top of a wide consolidation range.

It is interesting to note that the Federal Reserve Economic Database recorded a significant spike in the U.S. recession probability reading. Other indicators remain in the green. It may be prudent to be extra vigilant given the excellent track record of this indicator. Since roughly 1967, once the indicator reached the current probability reading, it has always been followed by an economic recession.

Given the current inflation situation, rebalancing to underweight bonds may be prudent. Consider also, that should the government pass an infrastructure bill, it seems quite likely that such a bill would contribute to additional inflationary pressures. This view could be nullified should the economy slip into recession as noted above.

All the best in the week ahead!