📈 US recession warnings

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Despite a slowdown in some areas of the economy, the US labor market has remained resilient. However, signs of wear and tear are starting to show as the Federal Reserve tries to suppress demand and cool inflation. The Federal Reserve's favored indicator for a potential recession has hit a new low, fueling expectations that the central bank may need to cut interest rates soon to stimulate the economy.

Furthermore, Following the collapse of Silicon Valley Bank (SVB) three weeks ago and UBS's takeover of Credit Suisse two weeks ago, investors are reflecting on the lessons learned from these events as the markets stabilize.

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Markets

What to expect from the jobs report on Friday (4 minute read)
The US labor market has remained resilient despite a slowdown in other areas of the economy. However, as the Federal Reserve attempts to suppress demand and cool inflation, signs of wear and tear are beginning to show. Job cuts are increasing, hiring activity is losing momentum, and there is uncertainty regarding the potential impact of recent turbulence in the banking sector on the wider economy. This represents a significant shift from the labor shortage of 2021 and 2022, when companies struggled to find workers. The upcoming jobs report for March is expected to shed more light on the situation, with economists predicting a notable reduction in job gains compared to previous months.

'Powell's curve' plunges to new lows, flashing US recession warning (2 minute read)
The Federal Reserve's go-to signal for an impending recession has hit a new low, lending weight to those who believe that the central bank will soon need to cut interest rates to stimulate the economy. The Fed's research has shown that the "near-term forward spread" - a measure that compares the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill - is the most dependable bond market signal of an upcoming economic contraction. This spread has been in negative territory since November and has now dropped even further, standing at nearly minus 170 basis points as of Thursday. Fed Chair Jerome Powell had previously noted that the 18-month U.S. Treasury yield curve was the most reliable indicator of an impending recession.

Jobless claims aren't as low as they seemed (2 minute read)
Thursday mornings this year have brought with them a peculiar mystery: despite reports of layoffs and a softening job market, the number of people filing new claims for unemployment benefits has remained exceptionally low. While this initially suggested an extraordinarily tight job market, new seasonally adjusted data indicates that the labor market may not be as robust as previously thought. This illustrates how the unprecedented economic disruption caused by the pandemic three years ago continues to make interpreting data a bit more challenging than usual. To be sure, weekly claims serve as a valuable early warning system for potential issues in the labor market. In a healthy job market, around 200,000 people typically file jobless claims each week, while that number can soar to 400,000 or more during a recession.

Investing

Gold Prices Are Nearing An All-Time High. Could They Push Even Higher? (5 minute read)
Gold, the world's oldest valuable commodity and a traditional safe haven during economic downturns, has recently experienced a surge in price, surpassing the $2,000 per ounce mark this week for the first time since 2020. Several factors are driving the price increase, and many experts predict that this trend will continue throughout 2023 and beyond. However, some are skeptical about these claims and wonder if the optimism surrounding the commodity's future is warranted.

Three Weeks On, What Did We Learn From the Banking Crisis? (5 minute read)
It has been three weeks since Silicon Valley Bank (SVB) collapsed and two weeks since UBS took over Credit Suisse. As the markets settle, investors are reflecting on what has been learned from these events. The banking sector's reliance on confidence remains a constant reminder that, even though deposits are mostly guaranteed, customers may still withdraw their cash during periods of market stress. In response, regulators in the United States acted quickly and comprehensively to address these concerns. Recent events may also strengthen arguments against looser regulations, which some had been advocating for in the name of competition. As the industry continues to evolve, it remains to be seen what the long-term impact of these recent events will be.

Money

Mortgage Rates Are Down for Fourth Straight Week (6 minute read)
This week, the cost of borrowing for the popular 30-year fixed-rate mortgage decreased, making homeownership a bit more affordable for potential buyers. Freddie Mac's weekly rate analysis reported that the average rate for a 30-year mortgage was 6.28% for the week ending April 6. This rate represents a decrease of 0.04 percentage points from the previous week, continuing the four-week streak of rate reductions for 30-year mortgages, with a total drop of almost half a percentage point over the period. However, the news for 15-year fixed-rate loans was not as positive. The average rate for a 15-year mortgage increased slightly by 0.08 percentage points to 5.64% this week.

You should aim to be financially independent… Enough (5 minute read)
Financial Independence (FI) used to be interpreted as solely FIRE (Financial Independence, Retire Early). However, there are now variations on the FIRE theme, such as Fat FIRE, Lean FIRE, Barista FIRE, and Coast FIRE. Although aiming for complete Financial Independence at an early age may seem like a good goal, it can be harmful because it may cause people to stay in a high-paying job they dislike, calculate a huge amount of money needed to achieve FI, and create the impression that the goal in life is to not work rather than finding meaningful work.

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