Another recession indicator is flashing
Add Axios as your preferred source to
see more of our stories on Google.
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."
Go deeper: Will the yield curve lead to recession? It really is different this time
