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Business Insider
09-06-2025
- Business
- Business Insider
The economy might be just fine after all
Welcome back! Do you know where your friends are? No seriously. Do you? If you're part of Gen Z, there's a good chance you're tracking their locations with the Find My Friends app. The rest of us … not so much. In today's newsletter, the case for the economy heading in the right direction is growing. What's on deck Markets: Three big things Citadel interns will learn during their first week on the job. Business: Online communities for helping people who were laid off are gaining steam. But first, don't sweat it. If this was forwarded to you, sign up here. The big story Economic optimismIt turns out the economy might be fine after all. After plenty of handwringing about what the future might hold, the hard data indicates an economy that's in decent shape. The latest good news was May's better-than-expected jobs report. The 139,000 jobs added were more than the 126,000 economists had expected. I don't mean to be too optimistic — when I mentioned this newsletter topic to my boss, they responded earnestly, "IS IT?" — but investors are also feeling a lot better about things. The Leuthold Group wrote in a recent note that the market believes the US economy will keep growing and is trading like there's "no recession risk whatsoever," writes BI's Christine Ji. The focal point of the investment firm's argument is the S&P 500 Cyclical/Defensive Ratio, which compares economically sensitive sectors to consumer staples. The higher the number, the more bullish investors are about the economy's prospects. Last month, the ratio hit an all-time high of 1.19, meaning cyclical stocks have a 19% edge over defensive ones. Translation: Investors aren't sweating a downturn. REUTERS/Lucas Jackson That's not to say we're totally in the clear. (You didn't think it would be all sunshine and rainbows, did you?) Bank of America, for one, recently warned of two big sell signals in stocks that are close to flashing, writes BI's William Edwards. One is the amount of money flowing into global stock funds: nearly 1% of their current assets under management within a four-week span. The other is that the vast majority of countries' indexes (84%) are trading higher than their moving targets. Both signals suggest investors could be getting too bullish for their own good. But BofA's warning is like a lot of the concerns about the economy and market going around these days: things that could happen. That's not to say those worries aren't valid. The uncertainty around tariffs remains a real question mark. And if the US posts a second-straight quarter of GDP contraction, it will be in a technical recession. Still, those issues haven't necessarily materialized in the economic data. Outside of last week's weaker-than-expected ADP jobs data, things are looking good. And Wednesday will be another chance to review the hard data with the monthly inflation report. 3 things in markets 1. Broke: Dr. Doom. Bespoke: Dr. Boom. Nouriel Roubini has been known as Wall Street's "Dr. Doom" for 17 years, but lately he's sounding pretty positive. Roubini has scaled back his recession call and thinks the US is headed for an investment boom — and he told BI why. 2. How to stand out in your Citadel internship. Head of campus recruiting Matt Mitro told BI the three keys to success that interns at Ken Griffin's hedge fund (and its market-making sister firm, Citadel Securities) learn in the first week. 3. Can JPMorgan be unionized? Dissatisfied staffers certainly hope so; they're organizing largely in response to the bank's RTO mandates. If a similar effort over at Wells Fargo is any indication, however, workers at Jamie Dimon's company have a long road ahead. 3 things in tech 1. Exclusive: Amazon freezes retail hiring budget for this year. The company said it will keep a "flat headcount opex," or operating expenses, according to a copy of an internal email obtained by BI. The company is still hiring, but holding the budget steady could encourage managers to get smarter with compensation expenses, BI's Eugene Kim reports. 2. Nvidia's challengers rise. Nvidia's costly and power-hungry chips are prompting competitors to seek more efficient solutions. Many of them are carving out a niche with chips for specific tasks, and industries, from high-frequency trading to sovereign AI, are already turning away from Nvidia. 3. Apple's big day may get awkward. The company's annual Worldwide Developers Conference is known for its flashy product announcements, drawing fanatics and investors to its headquarters. But this year, there will be some elephants in the room. BI's Peter Kafka broke down Tim Cook's problem. 3 things in business 1. A less colorful corporate Pride Month. Some companies are toning down their LGBTQ+ support amid cultural and political pressures. Regardless of how companies proceed, though, nobody seems happy. 2. Baker Tilly 🤝Moss Adams. As PE reshapes accounting, these former rivals are joining forces, merging to create the sixth-largest advisory CPA firm in the US. BI spoke with the CEOs about why they struck a deal. 3. Laid off? There's a support group for that. It's clear layoffs don't just impact "bad" employees. Now, online communities are helping remove the stigma and get people back on their feet. From Substack to Reddit, here's how the jobless are rallying. In other news Ai Weiwei made a piece of art out of plastic bricks that cost $280,000. I did it for $250. Brookfield Properties lays off executives as it continues evolution from CRE giant to asset manager. VC's new favorite guessing game: Who is Arfur Rock, the 'Gossip Girl of Silicon Valley?' The latest TikTok trend: Saying your parent is a big-time business exec. The Trump-Musk feud is painfully awkward for the GOP. AI search tools might be as good as they ever will be, one AI founder says. YouTube is testing a new feature to help videos travel around the world. Diabetes startup Omada Health finally went public after 14 years. Here's who made bank. A Big Four consulting giant tries to make accounting less boring with AI. DeepWho? DeepSeek rolled out even more powerful, cheap AI tech. If you missed it, you're not alone. What's happening today Apple Annual Worldwide Developers Conference opens with keynote by CEO Tim Cook. New US travel ban affecting 19 countries goes into effect. It's Bill & Ted Day. Be excellent and party on, dudes. The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York (on parental leave). Hallam Bullock, senior editor, in London. Grace Lett, editor, in Chicago. Amanda Yen, associate editor, in New York. Lisa Ryan, executive editor, in New York. Lina Batarags, bureau chief, in Singapore. Ella Hopkins, associate editor, in London. Elizabeth Casolo, fellow, in Chicago.
Yahoo
08-06-2025
- Business
- Yahoo
'No recession bet whatsoever': The stock market isn't pricing in any sort of economic downturn, investment firm says
A trend in the stock market shows investors are betting on continued US growth, one firm says. Historically, an increase in defensive valuations has preceded a recession, but that's not happening. Equity managers are acting like "there's no recession risk whatsoever," The Leuthold Group said. Investors are betting that the US economy will continue to grow and they're behaving as if there's "no recession risk whatsoever," market research firm The Leuthold Group wrote in a note last week. That conclusion is based on a key indicator, the S&P 500 Cyclical/Defensive Ratio, which compares the most economically sensitive sectors, like consumer discretionary, industrials, and materials, to more stable areas of the market such as consumer staples, healthcare, and utilities. The Leuthold Group calculates this metric based on price to earnings, price to cash flow, price to sales, and price to book ratios. Cyclical stocks typically trade at a discount during recessions because their earnings are more vulnerable to economic slowdowns. Investors, meanwhile, pay a relative premium for the safety of defensive stocks with more inelastic demand. In May, this ratio hit an all-time high of 1.19, indicating a 19% premium for cyclical stocks relative to defensive shares. This isn't an anomaly, as the ratio has held above 1.05 — placing it in the top 10% of historical readings — for 13 consecutive months. Recession fears have come down since reaching a fever pitch in April. After the announcement of a 90-day tariff pause and trade negotiations with China, the odds of a recession have fallen from 66% to 28% on prediction market Polymarket. However, several Wall Street strategists are still concerned, as a 28% chance of recession is still higher than the long-term average of around 15%. Torsten Sløk, chief economist at Apollo, and Jamie Dimon, CEO of JPMorgan, have been ringing the bell on stagflation concerns. According to The Leuthold Group, a 28% chance of recession is still far too high based on what the market is pricing in. Ahead of past recessions — including 2000, 2008, and 2020 — cyclical sectors were trading at steep discounts to their more stable counterparts. The average valuation gap at pre-recession market peaks was about 25% in favor of defensives. During these recessions, the average valuation gap increased to 38%. "Much of the recession 'discount' in the comparative valuations of Cyclicals occurred during the twelve months (or earlier) preceding the pre-recession stock market peak. Today, that process does not appear to have begun," the firm wrote. The elevated S&P 500 Cyclical/Defensive Ratio also reflects some valuation shifts that have occurred over the last few decades. Defensive stock valuations have been declining as long-term growth for consumer staples and healthcare companies slow down. These companies now trade at a 10% discount to the S&P 500, compared to a medium premium of 10% since 1990. During previous recessionary bear markets, defensives traded at a 33% premium relative to the rest of the market, suggesting room for a defensive comeback if recessionary fears return. If this does occur, investors heavily exposed to cyclicals will suffer the most. Investors are continuing to bet on the most economically sensitive parts of the market. As long as cyclical stocks retain their valuation premium against defensives, it seems like there's no recession scare to be worried about. Read the original article on Business Insider Sign in to access your portfolio
Business Insider
08-06-2025
- Business
- Business Insider
'No recession bet whatsoever': The stock market isn't pricing in any sort of economic downturn, investment firm says
Investors are betting that the US economy will continue to grow and they're behaving as if there's "no recession risk whatsoever," market research firm The Leuthold Group wrote in a note last week. That conclusion is based on a key indicator, the S&P 500 Cyclical/Defensive Ratio, which compares the most economically sensitive sectors, like consumer discretionary, industrials, and materials, to more stable areas of the market such as consumer staples, healthcare, and utilities. The Leuthold Group calculates this metric based on price to earnings, price to cash flow, price to sales, and price to book ratios. Cyclical stocks typically trade at a discount during recessions because their earnings are more vulnerable to economic slowdowns. Investors, meanwhile, pay a relative premium for the safety of defensive stocks with more inelastic demand. In May, this ratio hit an all-time high of 1.19, indicating a 19% premium for cyclical stocks relative to defensive shares. This isn't an anomaly, as the ratio has held above 1.05 — placing it in the top 10% of historical readings — for 13 consecutive months. Recession fears have come down since reaching a fever pitch in April. After the announcement of a 90-day tariff pause and trade negotiations with China, the odds of a recession have fallen from 66% to 28% on prediction market Polymarket. However, several Wall Street strategists are still concerned, as a 28% chance of recession is still higher than the long-term average of around 15%. Torsten Sløk, chief economist at Apollo, and Jamie Dimon, CEO of JPMorgan, have been ringing the bell on stagflation concerns. According to The Leuthold Group, a 28% chance of recession is still far too high based on what the market is pricing in. Ahead of past recessions — including 2000, 2008, and 2020 — cyclical sectors were trading at steep discounts to their more stable counterparts. The average valuation gap at pre-recession market peaks was about 25% in favor of defensives. During these recessions, the average valuation gap increased to 38%. "Much of the recession 'discount' in the comparative valuations of Cyclicals occurred during the twelve months (or earlier) preceding the pre-recession stock market peak. Today, that process does not appear to have begun," the firm wrote. The elevated S&P 500 Cyclical/Defensive Ratio also reflects some valuation shifts that have occurred over the last few decades. Defensive stock valuations have been declining as long-term growth for consumer staples and healthcare companies slow down. These companies now trade at a 10% discount to the S&P 500, compared to a medium premium of 10% since 1990. During previous recessionary bear markets, defensives traded at a 33% premium relative to the rest of the market, suggesting room for a defensive comeback if recessionary fears return. If this does occur, investors heavily exposed to cyclicals will suffer the most. Investors are continuing to bet on the most economically sensitive parts of the market. As long as cyclical stocks retain their valuation premium against defensives, it seems like there's no recession scare to be worried about.
Yahoo
22-05-2025
- Business
- Yahoo
America could be scaring itself into a self-inflicted recession, CIO says
The US risks scaring itself into a recession, Doug Ramsay says. The Leuthold Group CIO pointed to deteriorating consumer sentiment readings in recent months. "It's an outcome that would not merely be self-fulfilling, but self-inflicted as well," Ramsey wrote. Americans' nervousness about the economy could inadvertently push the US closer to a full-blown recession, according to a chief investment officer. Doug Ramsey, CIO of The Leuthold Group, said he believed that the risk of a "self-fulfilling confidence collapse" was elevated in the US. That's largely due to declining consumer sentiment, which could pose a major risk to the recession outlook, he said in a recent note to clients. Ramsey pointed to a handful of sentiment indicators he's watching: Consumer expectations. The Conference Board's Expectations Index, a gauge for how Americans feel about the economy, labor market, and business climate, dropped to a level of 54.4 in April. That's the gloomiest outlook among consumers since 2011. It's also well below a key threshold of 80, which tends to be associated with recessions, the Conference Board said. 1-year inflation expectations. The median consumer expectation for inflation 12 months from now is 5%, per the University of Michigan's latest survey. That's up from a low of 2.6% in November. 1-year expected change in unemployment. The percentage of consumers who expected unemployment to rise over the next year rose for the fifth-straight month in April to 67%, per University of Michigan survey data. That's more than double the percentage of consumers who believed unemployment would rise for the next year in November 2024. Consumer expectations make up a big chunk of the economic outlook and could weigh on GDP if consumers pull back from spending. Excluding other factors, the decline in Consumer Expectations alone in recent months could cause real GDP growth to fall from around 3% currently to "essentially zero," Ramsey estimated. "It's an outcome that would not merely be self-fulfilling, but self-inflicted as well," Ramsey wrote. GDP contracted 0.3% in the first quarter, according to advanced estimates from the Commerce Department. It would take just one more quarter of negative growth for the economy to slip into a technical recession. Forecasters, though, generally say the economy remains on solid footing overall. GDP is expected to expand 2.4% over the current quarter, according to estimates from the Atlanta Fed. The unemployment rate also remained at 4.2% in April, near historically low levels. Read the original article on Business Insider Sign in to access your portfolio
Yahoo
22-05-2025
- Business
- Yahoo
America could be scaring itself into a self-inflicted recession, CIO says
The US risks scaring itself into a recession, Doug Ramsay says. The Leuthold Group CIO pointed to deteriorating consumer sentiment readings in recent months. "It's an outcome that would not merely be self-fulfilling, but self-inflicted as well," Ramsey wrote. Americans' nervousness about the economy could inadvertently push the US closer to a full-blown recession, according to a chief investment officer. Doug Ramsey, CIO of The Leuthold Group, said he believed that the risk of a "self-fulfilling confidence collapse" was elevated in the US. That's largely due to declining consumer sentiment, which could pose a major risk to the recession outlook, he said in a recent note to clients. Ramsey pointed to a handful of sentiment indicators he's watching: Consumer expectations. The Conference Board's Expectations Index, a gauge for how Americans feel about the economy, labor market, and business climate, dropped to a level of 54.4 in April. That's the gloomiest outlook among consumers since 2011. It's also well below a key threshold of 80, which tends to be associated with recessions, the Conference Board said. 1-year inflation expectations. The median consumer expectation for inflation 12 months from now is 5%, per the University of Michigan's latest survey. That's up from a low of 2.6% in November. 1-year expected change in unemployment. The percentage of consumers who expected unemployment to rise over the next year rose for the fifth-straight month in April to 67%, per University of Michigan survey data. That's more than double the percentage of consumers who believed unemployment would rise for the next year in November 2024. Consumer expectations make up a big chunk of the economic outlook and could weigh on GDP if consumers pull back from spending. Excluding other factors, the decline in Consumer Expectations alone in recent months could cause real GDP growth to fall from around 3% currently to "essentially zero," Ramsey estimated. "It's an outcome that would not merely be self-fulfilling, but self-inflicted as well," Ramsey wrote. GDP contracted 0.3% in the first quarter, according to advanced estimates from the Commerce Department. It would take just one more quarter of negative growth for the economy to slip into a technical recession. Forecasters, though, generally say the economy remains on solid footing overall. GDP is expected to expand 2.4% over the current quarter, according to estimates from the Atlanta Fed. The unemployment rate also remained at 4.2% in April, near historically low levels. Read the original article on Business Insider
