The Recession Goalposts Moved Once Again

When the goalposts keep moving, it’s easy to get confused…

First, the Federal Reserve told us that inflation would be “transitory.”

Next, the Fed started saying that inflation really wasn’t as bad as the government’s own official data showed. It tried to tell us other metrics showed something different.

And now, the federal government is essentially telling us, “Just because it meets the historically accepted definition of a recession, that doesn’t mean it’s actually a recession.”


The White House published a blog post last week that said…

While some maintain that two consecutive quarters of falling real [gross domestic product (“GDP”)] constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle.

In other words, government bureaucrats moved the goalposts again.

But here’s what I’m wondering…

Two decades from now, when economics majors look at charts of previous recessions, will there be an asterisk next to this recession saying that it wasn’t really one?

It just sounds ridiculous. And the more important point today boils down to one question…

Will the big money buy the government’s narrative or will it call baloney?

After all, wherever the “smart money” goes, the rest of the market will follow…

Institutional investors (the so-called smart money) execute 85% to 90% of all the trades in U.S. stocks. That’s why our Chaikin Money Flow indicator is so powerful. It uses technical analysis to try to ferret out what smart money is doing at any given time.

So far this year, we’ve seen significant outflows in many different types of stocks…

The smart money ran away from tech companies like Meta Platforms (META), Alphabet (GOOGL), and Netflix (NFLX) through the first half of 2022. And it did the same with stalwart companies like Walmart (WMT), CVS Health (CVS), and Home Depot (HD).

Despite that, the mainstream media is buying the new position of the goalposts from the federal government. And together, they’re firmly in denial about our economy.

The media is now flooded with the narrative of “it’s not as bad as it looks.”

But just because the media is painting a rosy outlook doesn’t mean you should position your portfolio that way. A lot of the data shows the picture isn’t as rosy as it seems.

We can’t let the changing goalposts distract us. Just look at what the data actually shows…

  1. Inflation is at a 40-year high with no indication of letting up soon.
  2. Preliminary data shows that U.S. GDP has declined for two straight quarters. That checks the box for an official recession.
  3. And even though companies have reported better-than-expected earnings lately, they’re still poor.

The data paints a much bleaker picture than the government and the media. But it’s also not the end of the world.

Don’t panic. Instead, prepare for what comes next…

Make sure you aren’t overexposed to any one sector or position. Be on the defensive side for now. And keep some cash on hand for any buying opportunities that pop up.

Remember, don’t get caught in the government’s narrative that everything is OK today.

When it comes to the White House, the Fed, and the media… the recession goalposts have legs. They’ve taken quite the walk over the past month.

Don’t let that fool you.

Good investing,

Karina Kovalcik

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