Contrary to the mainstream financial media – I think the U.S. is already in a contractionary-cycle (or on the cusp of it).

And as more and more hard data comes out – the global elite’s “everything is going good” story will continue falling apart.

For starters. . .

According to Union Bank of Switzerland (aka UBS) – the probability of a U.S. recession just spiked its most in 30 years. (In fact – this sharp jump even shocked UBS analysts).

To give you some context: UBS pegged the probability of a “major contraction” in the U.S. at only 24% in December 2018 – three months ago.

But now it’s up to 73% – the largest month-over-month jump in recession risk since 1989. . .

That’s quite a scary increase – especially compared to how low it was only a couple months ago. (It’s important to note how fast these things can change – one month everything looks good, and the next, not so much.)

So let’s break things down. . .

UBS’s takeaway is that the weakness in ‘hard data’ is now “fully consistent” with the real risk of a recession.

For instance – there have only been five intra-cycle slowdowns in the past 50 years. And even if there isn’t a full-blown recession – there’s still an economic slowdown (as the world witnessed in 2015 when oil prices and investment collapsed).

Take a look for yourself – see the sharp spike in 2019?



So – in summary – even if there isn’t a technical recession (two back-to-back quarters of negative GDP readings) – there’s still economic slowing going on in the U.S.

And in UBS’s eyes – the sharp drop in ‘durable goods’ buying is to blame (a composite of retail items including appliances, sporting goods, cars – aka things with useful life of three years or more).

Making matters worse – UBS adds that. . . “spending on furnishings, durable household equipment, and recreational goods [boats for the wealthy] are down the most since 2009, while spending on services has plunged by the most since 2012…”

Keep in mind that orders of ‘durable goods’ is a key ‘leading indicator’ (an economic variable that changes before the rest of the economy begins to). That’s because when business and consumers buy more durable goods, that is a sign the economy is improving (and vice versa).

Now – readers shouldn’t be surprised from any of this. We’ve been tracking the slowing global economy for months now.

And this sharp deterioration in durable goods and consumer spending is in line with what we’ve been seeing from other important ‘leading indicators’ and ‘lagging indicators’ (a measurable economic factor that changes only after the economy has begun to follow a particular pattern or trend).

For starters – the latest forecast from the Atlanta Fed GDP-Now gauge estimates Q1/2019 GDP coming in barely above zero (0.2% to be exact).

And further – not even two weeks ago – I wrote about the significance of collapsing South Korean exports (Asia’s fourth largest economy). And why it’s a key economic ‘leading indicator’ of global trade and corporate earnings. (If you haven’t read it yet – please do so here as it’s one of my favorite indicators).

But since publishing – South Korean exports have looked even worse.

Just released data shows that South Korean exports fell the most in nearly three years – and this followed China’s complete collapse in February exports – which were down over -20%.

This deepening export slump between Asia’s largest economies come at a time when global growth is slowing (especially in the Eurozone).

All this – and more – is why I expect there to be a deep global earnings recession by late 2019. And soon after that for the Federal Reserve to step in and start easing (maybe even sooner).

If Q1/2019 GDP really does come in below 0.5% – then the Fed may begin sooner than many expect.

So be on the lookout for further stimulus from central banks worldwide – and position for it (such as weak U.S. dollar, long gold, long bonds).

Because that’s what’s coming as this tightening cycle nears it ugly end.

AS A DISCLOSURE: Because of the asymmetry (low risk – huge upside) of buying long dated out of money options. I personally purchased the Yamana Gold Corp ($AUY) Jan20’20 $3 Calls @ an average price of 0.18 for my own weak-USD portfolio.

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