Economics:
I’m not going to tell you anything different than what the financial news tells you at the moment, we are on the cusp of a recession. Most pundits are saying Q3 it [recession] starts, I say in the middle of Q2(I’m sticking to my guns).
I am surprised by the resilience of the labor market. Jobless claims have been stubborn, as well as unemployment. Despite job losses across sectors - especially tech - unemployment is low - U3 is 3.5%.
I do expect trends of negative economic shifts to appear in Q1 numbers. This will trigger the selling activity to retest lows.
Markets:
We are going to retest lows soon. The trend, however, will need to begin first. We are right before that.
(I understand there are better ways to say that, but it’s true.)
Macro-Driven: Interest rates will have their effects on the economy. Businesses will soon be changing their investment habits. This can be seen in layoffs at the moment. Alternatively, however, there is a secret hidden in the commercial real estate market that is more telling. Like residential mortgages, commercial real estate is also impacted by rates, but with one additional impression, it makes on the real economy. Individuals are not deciding to invest, and it is an individual whose decision impacts many that are making the decision.
That activity has completely stopped. Therefore many people’s activity has stopped.
Micro-Driven:
Unit economics has improved because the inflation pace has slowed. Making investment decisions are now more predictable. This is more or less the federal reserves mission. Despite recession talk, the best investments are made during this time because they are done and managed mindfully. When money costs more, decisions count more.
The Patriot, with Mel Gibson and Heath Ledger, is one of my favorite movies. One of my favorite lines of all time comes from it - “Aim small, miss small.” Executives will do this over the next 12-18 months because of the cost of debt. At least, they are better … competition with AI is about to heat up.
(Let’s hope).
Sacramento Wealth Mechanics:
As a financial advisor, you learn about some of the most interesting stories. Being a Sacramento, CA native, I was ashamed to admit that I hadn’t noticed the region's availability and depth of idle capital stocked with the local small businesses. And because of the complexities of each person’s story, each business formed unique processes to survive. Some businesses create their processes incredibly efficiently, while others make you want to itch your head in complete confusion.
I’ve learned how homebrewers have done well for themselves because of the idle time the equipment the established breweries have overnight. Some brewers are paying all their bills in just a few days of brewing beer out of the month.
2023 is the year of side hustles. Here is a unique one, and powerful one.
Firm Updates:
-MechFi’s is middle of figuring out how to bring Hoop-It-Up back to Sacramento, CA.
Content:
-My predictions for the S&P are in my 2023 Predictions (Annual Range: 3600-4300)