Mass layoffs have begun leading to high unemployment. World trade is slowing down. Geopolitical tensions are heating up in different parts of the world and central banks have been raising interest rates in earnest since last spring. So many red lights are flashing indicating that we have finally arrived at our destination.
Welcome to Recession City. Actually, the sign should read, 'Welcome to Recession World'. It's not just the U.S.A. that's in recession as the 'contagion' has spread around the globe. Currencies around the world are being adversely affected. Just look at the screen shot below of a search I conducted regarding the Pakistan Rupee. You can see how well it's performed since last spring. Look closely at the dates!
Since last spring, the Pakistan Rupee has been in free fall. This is just one example of many currencies falling against the dollar since the FED began raising interest rates last spring. Another example is Sri Lanka, having defaulting on its obligations.
Closer to home though, listed below are what I believe are the top 7 signs we are already in recession.
1. The biggest sign comes from the Baltic Dry Index which, on Tuesday suffered a record 17.5% one day decline. The index measures global shipping and the sharp decline in shipping rates is pointing to a slowing global economy. The 'smart money' is taking notice...
2. Mortgage rates have doubled since a year ago at this time. The average for a mortgage is now 6.48% while a year earlier, it was at 3.22%. According to TheRealDeal.com, the decline in November home sales in the U.S.A. was the largest in 10 years. According to the FED, rates are going even higher in 2023 and that spells more trouble for the housing / real estate market. Home sales are down 10 months in a row and by more than a third since January, 2022.
3. Mass layoffs are on the rise. Amazon just announced they are laying off more than 18,000 people. This is the biggest worker reduction in the company's history. Across the board, big tech companies such as META (Facebook) and Twitter are in layoff mode (more than 150,000 in 2022). U.S. manufacturing is also in decline and that too spells trouble.
4. Full year auto sales have tumbled to a low not seen since 2011. Every time a recession is on the horizon, the automotive sector always slows down. I've lived through a few recessions now and it's always been the auto sector that saw the most turbulence. Things might have changed a bit with the introduction of the tech / information sector but nevertheless, the auto sector employs hundreds of thousands of people. Expect more layoffs from this sector, unfortunately.
5. For six months in a row, the U.S. Services PMI has seen contractions in output and new business as unease has led to dwindling demand and order postponements.
6. The U.S. trade deficit saw a November reduction of 20%, the biggest monthly drop since the Great Financial Crisis. In October, the deficit hit $77.8B while the November figure came in at $61.5B. This signals less imports which signals a drop in global trade which brings us back to the Baltic Dry Index which is indicating the same thing, a global slowdown.
7. Rising interest rates. Central banks around the world, led by the FED have been increasing interest rates since last spring. According to SmallBizTrends.com, small business loans declined to 14.6% in November. Two years ago, the number was 28.3%. That's an almost 50% drop in loan approvals. An article published on MPAMag.com, states that home loan applications have fallen to a 27 year low! As for auto sales, expect pain there as well. Then, there's the credit cards getting maxed out like never before. Miss a payment and that rate jumps to 30% in many cases.
These are my top 7 signs we are already in a recession. Maybe I should have put 'rising interest rates' at the number one spot but I put the Baltic Dry Index at number one because it is a sure sign that this isn't just an issue for one part of the world or another. This time around, we're all going to feel the pain.
Knowing how to navigate through hard times is not that difficult. Avoid debt, invest wisely through diversification and have some cash on hand. I also encourage my readers to start diversifying into precious metals. Check out the charts in this article at KingWorldNews.com that shows multiple currencies' performance against gold in 2022.
Gold is the clear winner.
As a Canadian, I can tell you that gold has been at record highs against the Canadian dollar for a couple of years now. I can understand the frustration Pakistanis are feeling as they go to buy gold at record highs they've never witnessed before.
Even against the Almighty Dollar, gold is hitting nominal record highs never seen before. Yes, it hit $1,950 in 2011 and $2,070 in August 2020 but was only a brief spike before tumbling again. These days, gold is heading back to $1,900 but this time is holding its gains. In January, 2022 gold started around $1,800 and closed the year near the same mark, a very rare thing to occur. What we are seeing now is 'true' record highs that are holding their ground. As gold rises, the U.S. dollar loses more purchasing power.
Buy an ounce of gold to protect your purchasing power. That's why gold is regarded by many, including myself, as insurance in the face of high inflation and interest rates. Check out OwnX below, thanks!
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