I Am NOT Buying This Bounce
At 10am ET on Thursday investors were served notice that the odds of recession have increased. That came in the form of a paltry 50.2 reading for US ISM Mfg. This extends nearly a year long decline from the peaks in the high 50's to this level that borders on an outright contraction.
There is no relief in the key components as New Orders is at the lowest level since August 2012. Add that with Backlogs at a meager 41.5 and it says that the group is running on vapors.
For those about to say that manufacturing only represents 15-20% of the US economy...you are missing the point. This group is typically the leading indicator for the rest of the economy. So, if manufacturing is heading south, typically other groups are soon to follow.
I wasted no time in selling 5 stocks in the Reit. Trading Alert following this announcement. This has my portfolio now standing at -10% net short the market. Yes...net short.
This is NOT a guarantee that a recession and bear market are on the way. However, the odds of this happening have increased and likely stocks will head lower to reprice this new level of risk.
Plain and simple, the more the odds move towards recession and bear market the more defensive you should get. If and when the fundamental outlook switches back to more bullish evidence, then quickly glide back in that direction.
Just like the chant at football games. Now is the time for DEFENSE!
Best,
