🍔Growth Scare

Is the recession finally here?

Welcome back! It’s been a choppy several months for stocks and investors are in need of guidance more than ever.

This week, something important happened. One of our signals hit a critical point. Find out what it means by joining as a paid subscriber!

We didn’t get the breakout or squeeze we were looking for last week. Instead, we got a sharp rejection at the highs and a break down. We will be making some important portfolio adjustments, as detailed in this report.

Macro narrative shifting

Continuing from our post “Cracks in the Economy”, the macro continues to deteriorate modestly. Last week’s data had small business optimism and retail sales both falling. This week showed jobs, services PMI, home sales, and consumer sentiment all falling.

Econ data coming in negative

There were some bright spots in manufacturing, but as we said two weeks ago, much of that is frontloading of purchases ahead of tariffs. Even within those strong-looking manufacturing prints, future orders were weak.

We also said DOGE cuts would impact jobs, given that government-funded sectors have been propping up employment growth lately. We are now starting to see that play out in jobless claims in Washington, DC (chart below). Year-to-date, DC leads other states in job losses, by a wide margin.

Jobless claims in DC

Thankfully though, this hasn’t spilled over into the rest of the economy yet as country-wide jobless claims are still stable. But we do have GDP estimates stair-stepping down since the beginning of the year (green line) and the economic surprise index falling.

GDP forecasts dropping

The market is finally waking up to our view. The narrative is shifting from “animal spirits” to “slowing growth” due to tariffs, slowing immigration, and DOGE cuts. Hedge fund managers came out of the woodwork to share their bearish views, so we know the growth scare is happening. The big question is, does this devolve into a recession?

Our recession call

Different aspects of the economy deteriorate at different speeds. Leading up to a recession, you usually see things collapse in this specific order:

---

The rest of this article is for paid subscribers. Upgrade below to continue reading:

• Our recession call

• Why inflation is fake

• Housing market in 2025

• Big change in market signals

• Lackluster Mag 7 stocks

• Attack on defense stocks

• New bubbles forming