In this Stockhead series, investment manager James Whelan, managing director of Barclay Pearce Capital Asset Management, offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.

 

Top of the afternoon to you and here’s to a wonderful opening of the finals weekends for AFL and NRL ahead.

Swans managed to get it done in just the right amount of time vs a worthy Giants opposition. I never doubted them for a second and it really brought home something I tell the girls at home that there’s only one point in time that matters if you’re ahead and that’s after the siren sounds.

Until then never drop your head.

 Not dropping the head is imperative to my life for the next few weeks as we not only rumble along towards the formal launch of a wholly integrated Wealth Management solution but I’ve also decided to test myself on a #BackJimmy rugby union/league challenge. It certainly has my focus, and having a 250-game Australian Kangaroos rep/all-time great centre (that’d be Crhis Lawrence) rumbling towards you as you wait for the high ball to arrive is certainly a good way to get my attention.

Point of it all is that if I, a complete amateur, can be surrounded by experts the help me on the way to become competent in the game, then surely we, experts in our field, can get any amateur up to speed on the management of their portfolios. I have the utmost confidence I am correct about both theories.

 

Can’t put it off any longer

I’ve stalled as long as I can and I can’t put it off any longer. The market… she’s not so good.

In last week’s note from the Windy City I mentioned September was traditionally weak and with the look of things it seemed prudent to reduce exposure.

We also cover it in the Theory of Thing podcast recorded Friday which has all the figures you require. (See link at the bottom of this article.)

 

Pic supplied

 

Okay, maybe “reduce exposure” was a slight understatement.

 

That’s Sahm kind of rule

If we take a look back to pre-Jackson Hole days we had a lot of panic about the Sahm Rule being triggered.

Sahm Rule? As a reminder that’s when… you know what, let’s just get the definition from the St Louis Fed:

“Sahm Recession Indicator signals the start of a recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to the minimum of the three-month averages from the previous 12 months.”

So, a sharper increase in the unemployment rate moving average over the shorter term as compared to the longer term.

 

Pic supplied. Source: Sahm, Claudia, National Bureau of Economic Research, Game of Trades

 

The Sahm Rule has finally been triggered and it has a 100% record of predicting recessions.

So, despite the current pricing and commentary around it, I believe there’s a real chance that 50bps comes to the fore. “If the Fed goes 50 it means there’s something really wrong.”

It won’t be this time but I’ll up the chances of chat around one later in the year. By then, things will start to shape up as not looking so grim. Which they aren’t.

I’ll very rarely, if ever, call for panic. Here’s the thing… the Fed has wiggle room.

 

When to buy?

Re our strategy, there’s always a chance to do some buying and since we’re all about long-term investing here, there’s a lovely chance to add.

I mentioned the above over the weekend and someone asked me when? You want a date? Fine…

October 8, 2024

Wow, that was easy.

 

Pic supplied. Source: All Star Charts

 

But if you think there’ll be a recession then leave it a few weeks later.

But seriously no one can pick the date. But if you have cash on the sidelines then it might be an idea to push some in around that date.

And careful on the Mag 7 being bought purely for the old AI reasons. At least if your idea of AI is people using Chat GPT (which it isn’t. This chart is still something though)

Pic supplied

 

And if it feels like you’re in a personal recession here in Australia then you are correct. I can’t write about it because it makes me too angry.

 

Pic supplied. Source: macrobusiness.com.au

 

Could be time to become ungovernable.

Pic supplied

 

All the best and stay safe,

James

 

Theory of Thing podcast > Listen here for all the market news you need.

The views, information, or opinions expressed in the interview in this article are solely those of the writer and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

 

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