TLDR:
In the lead up to 2023, economists warned of an upcoming recession. Now in the lead up to 2024, economists are still warning of a recession but a milder one than expected. Will the narrative change to no recession by 2025?
Deutsche Bank came out with its annual world outlook this week and wrote that it believes a lag in monetary policy will trigger a mild recession by H1 2024, which will eventually lead to a more aggressive cutting profile from the Fed than markets are currently pricing in (yipee).
Similar to your typical recession, growth will stall and unemployment will rise, but in a mild recession that does not guarantee an impact on the housing or stock market.
So what could a mild recession entail?
Unemployment will rise, PMIs will likely contract, GDP could drop and inflation will definitely still be above target.
At the same time, rising corporate earnings and potential rate cuts by mid next-year will likely drive markets higher. For example, the consensus across big banks is that the S&P 500 will be at ~5000 by the end of next year.
So what sectors have historically performed the best (and worst) in such an environment?
History shows that Auto & Components, Retail and Gold Miner sectors could be the best performers 6 months into a mild recession.
On the other hand, you may want to avoid Banks (especially Regional ones), Energy and Real Estate over the same period.
Need help picking particular stocks?
Head over to toggle.ai and get Exploring.
What’s happening in the markets?
This section is powered by Open AI connected to TOGGLE AI
Dell Technologies is set to unveil its latest earnings report tomorrow after the market closes.
In the previous quarter, the company exceeded analyst expectations by announcing an earnings per share (EPS) of $0.60 higher than anticipated. This positive surprise led to a remarkable 22% increase in the stock value within just one week of the announcement.
The market is optimistic about Dell’s potential gains from the surge in generative AI, particularly attributed to its PowerEdge servers. This is evident in the stock’s high price and forward PE.
Despite a recent report indicating that the recovery in revenues might take some time due to the company’s emergence from a PC sales downturn, there is an overall improvement in sales and earnings expectations. This optimism is further fueled by the company’s strategic cost-cutting initiatives across its operations.
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Earnings Update: RBC reports tomorrow
Canadian bank earnings kick off tomorrow, starting with RBC and then followed by TD and Canadian Imperial. Heads up – all 3 bank stocks tend to exhibit downside risk after earnings.
Discover how other companies could react post earnings with the help of TOGGLE’s WhatIF Earnings tool.
Asset Spotlight: Nifty breaks through 20,000!
Despite Nifty’s 14D RSI rising to 81, Toggle’s analysis of 17 similar occasions in the past indicates that the index could see further upside over the following 1 month. Read full insight!
General Interest: Baba Vanga’s 7 Predictions for 2024
Vangeliya Pandeva Gushterova, commonly known as Baba Vanga, was a Bulgarian clairvoyant who is said to have predicted 9/11 and the war in Ukraine.
Her 2023 predictions – a nuclear plant explosion and a claim that Earth’s orbit would change – haven’t been on point but she’s got a box full of prophecies, that is till 5079, when she expects the world to end.
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This material is from Toggle AI and is being posted with its permission. The views expressed in this material are solely those of the author and/or Toggle AI and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: TOGGLE Relationship with IBKR
IB Global Investments LLC, a subsidiary of Interactive Broker Group Inc., the parent company of Interactive Brokers LLC, is a minority owner of Toggle AI.
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