Another recession indicator is flashing
In addition to the inverted yield curve, there's another recession indicator Americans should be watching, analysts say: the value of corporate equities that households and non-profits own.
Why it matters: While prices have largely climbed back, households are still holding off on buying. Much of 2019's pickup in stock prices has been driven by corporate buybacks.
Details: How much of corporate equities that households and non-profits own as a share of U.S. GDP fell from its highs at the end of the year. It dropped in the last quarter of 2018 as equity prices fell and households sold shares.
- Analysts at Bank of America Merrill Lynch said institutions, hedge funds and private clients have been selling equities for 9 weeks straight.
- Deutsche Bank this week said its clients were rotating into bonds and out of equity funds.
The bottom line: "Sharp upward spikes in household equity valuations have often preceded recessions," Karl Schamotta, chief market strategist at Cambridge Global Payments, tells Axios.
- "The value of U.S. household investment as a share of GDP tends to peak just before a recession, meaning that the average person is over-invested at the top, and under-invested at the bottom of each cycle."