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Preparing for an Economic Downturn in the New Year

by | Jan 4, 2022

As most people return to work after long holiday vacations, it looks like the media is scrambling for headlines as well. Heck, it’s even a little slow for us as we wait to see what this week brings us…

But one thing is for sure… The news isn’t the only thing taking a downturn, because everything I’ve seen so far indicates a slowing economy in 2022.

I know what you’re thinking and, no, I’m not a fortune teller — even though I did predict slowing growth before the end of the year.

I just know exactly what to look for.

The only items of any interest to us were CNBC discussing how West Virginia Sen. Joe Manchin will not resurrect President Joe Biden’s “Build Back Better” plan…

Source: CNBC

And Bloomberg touting real estate prices, job quits… and Manchin again.

Source: Bloomberg

But there were a few reports Monday that should grab their attention instead…

For one, the ISM Manufacturing data shows that the 2022 economic slowdown I expected in the second quarter is already beginning.

Source: Bloomberg

The ISM Manufacturing data revolves around a base number of 50. A number above that baseline points to an expansion of the manufacturing segment of our economy, while a reading below represents a contraction.

And while the data we received Monday is still above 50, it’s 1.3 points lower than expected and 2.4 points lower than the previous month…

It’s safe to call that “slowing.”

On top of that, the ISM Prices Paid data fell, which indicated inflation has peaked for the near term.

Sectors for the Slowing Economy in 2022

Need more proof of a slowdown? Just look at the JOLTS job openings data in the above chart, which came in well below expectations. It’s become increasingly clear that labor will be hard to come by for a good long while.

Given the disinflationary pressures we’re already seeing — manufacturing slowing, prices paid falling — we should question Monday’s increase in Financials and Energy sector stocks. Because if we’re no longer pumping money into the market and commodities are disinflating… why would we want to put our money in those sectors?

Instead, there are other areas we should look to…

Such as Real Estate, Consumer Staples and Utilities.

Source: Bloomberg

On the flip side, however, watchlist member Consol Energy Inc. (NYSE: CEIX) has bounced considerably over the past couple of days. So if you’ve been buying ’em on red…

Source: Bloomberg

It would have been a good day to sell a little on green. If these weather patterns hold, there may be even more green to sell on over the next couple of weeks as well.

In fact, members of my premier service, Fortune Research Pro, get regular alerts for great entry and exit points to help manage a long-term position like CEIX.

Something that could come in handy if these markets turn choppy like I expect.

The playbook this week could add some Real Estate and fixed-income positions… average down on China… and maybe look at the first leg of a brand-new position.

But like any good quarterback, we take what the market gives us… And thus far, I don’t see any open windows.

Keep an eye on that inbox for this week’s watchlist…

I’m still on the fence as to whether we stay the course or shake things up amid the slowing 2022 economy, but I can guarantee there will be some new tickers to put on your radar!

All the best,

Matt Warder

Fortune Research

P.S. Is January the best month for trading?

Joy of the Trade Head Trader Jeff Zananiri sure thinks so!

And Jeff is hosting a LIVE educational class Wednesday, Jan. 5 at 1 p.m. EST to teach everyone why he loves a special strategy in particular…

“There’s no doubt in my mind, this is the top trading strategy for the next 30 days,” Jeff said. 

Last January, this exact strategy pulled a fat 210% winner from the market. 

So be there Wednesday LIVE, when Jeff will reveal his No. 1 trading strategy for January…

WRITTEN BY<br>Matt Warder

Matt Warder

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