Weekly Market Commentary July 28th, 2022

The Markets

A lot of people are worried that a recession may be in our future. 

Unemployment is low and inflation is high. Both tend to occur when an economy is experiencing strong growth. That makes it difficult to believe that we are headed for a recession, but there are some warning signs coming in from south of the border.

Last week, the Atlanta Federal Reserve’s GDPNow, an indicator based on a simple mathematical model which becomes more accurate over time as more data points become available, estimated that economic growth in the United States was -1.6 percent for the second quarter of 2022, after adjusting for inflation. They measured economic growth using gross domestic product or GDP, which is the value of all goods and services produced in a country over a specific period of time. That said, GDPNow is not an official reading, and the model tends to be a quite volatile. For example: 

• On April 29, when relatively little data was available for the second quarter, it was +1.9 percent. 
• On May 17, as retail trade and industrial production statistics filtered in, it was +2.5 percent. 
• On July 1, when construction spending and manufacturing data came out, it was -2.1 percent. 
• Last week, after housing starts were released, it was -1.6 percent.

Since the U.S. economy shrank by 1.6 percent in the first quarter of 2022, an official reading confirming that the economy shrunk in the second quarter as well would mean that the U.S. has experienced two quarters of declining economic growth. Technically, that would be a recession.  

By contrast, Statistics Canada reported that growth north of the border slowed to 0.8 percent in the first quarter (but remained positive), meaning that the earliest that we could technically be in a recession would be at the end of the next quarter, assuming the Canadian economy also shrunk during the second quarter (Canadian GDP data for Q2 will not be released until the end of August).

There is an important distinction between the two quarters. The slowdown in the first quarter was caused by surging imports and slowing exports, which is unusual. The slowdown in the second quarter may be caused by a slowdown in consumer spending, which is the primary driver of economic growth, and business spending.

Last week, major North American stock indices ended the week higher. Yields on shorter maturity Treasuries rose last week, both in the U.S. and Canada, while yields on Treasuries and Government of Canada bonds with longer maturities fell.

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The challenges of dating

As if the pandemic didn’t create enough dating challenges, inflation is now pushing the cost of dating a lot higher. More than 40 percent of people on the dating app Hinge said they think more about the cost of dating today than they did a year ago, especially members of Gen Z (the oldest Gen Zers are age 25), reported Paulina Cachero of Bloomberg.

Instead of meeting for drinks (the cost of alcoholic beverages was up 4 percent year-over-year in June) or sharing a meal in a restaurant (the cost of full-service dining was up 8.9 percent year-over-year in June) many people are opting for less expensive options, such as meeting for coffee, taking a walk, or cooking a meal at home.

Another challenge is keeping up with ever-evolving dating slang. “When you’re looking for love these days, it’s totally possible you might get breadcrumbed and orbited on your way to the soft launch,” reported Ashley Austrew on Dictionary.com. Here are a few definitions to know.

• Breadcrumbing. This is slang for leading someone on. Usually, breadcrumbing is chatting or flirting online through text or social media.
• Orbiting. When an ex – or someone else – stops communicating completely (i.e., they ghosted you) but they immediately offer a reaction when you post a picture or story on social media, they are orbiting you, reported Sophie Lloyd of Newsweek.
• Soft launching. When a product is soft launched, it goes through testing in limited groups. It’s the same with dating. A soft launch gives a person’s friends and followers the chance to get used to the idea of a significant other. It’s a slow-motion version of the boyfriend or girlfriend reveal, reported Kaitlyn Tiffany of The Atlantic.

The bad news is that it’s never easy to learn a new language. The good news is that the price of gas is dropping so the cost of dating should, too.

Weekly Focus – Think About It

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice.”

—Adam Smith, economist and philosopher

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