Strategies for a Recession - amechine/finance GitHub Wiki

Recession Indicators

Yield Curve Inversion

An inverted yield curve means short-term interest rates are higher than long-term rates, i.e. short-term yields are above long-term yields. Normally investors demand higher compensation (yield) for tying up their money for longer periods. The spread between the 10-year and two-year Treasury yields is a popular gauge.

GDP

US Bureau of Economic Analysis (BEA) releases Gross Domestic Product (GDP) data on a quarterly basis. GDP contraction often signals an economic downturn.

Industrial production

Industrial production (IP) measures the output of goods produced or mined in the U.S. A decline in industrial production suggests reduced demand and a potential recession.

Unemployment Rate

US Bureau of Labor Statistics (BLS) issues real-time unemployment data monthly. Rising unemployment is a classic sign of a recession. Please see its trend in this chart.

Consumer Spending

Consumer Spending also known as Personal Consumption Expenditures (PCE), measures the total amount of goods and services purchased by individuals in the US. It is a major component of the US GDP, making up a significant portion of overall economic activity.

Indexes

Volatility Index (VIX)

VIX introduced by the Chicago Board of Options Exchange (OBOE) use implied volatility of S&P 500 Index options to measure the levels of fear, stress, and risk in the stock market.

  • very volatile if VIX > 50
  • uneasy if VIX > 30
  • stable if VIX < 20

Index of Consumer Sentiment

  • The lower the index, the more possible the recession.
  • See index graph

Current Economic Conditions Index

  • The lower the index, the more possible the recession.
  • See index graph

Index of Consumer Expectations

  • The lower the index, the more possible the recession.
  • See index graph

Defensive Sectors & Stocks

Healthcare

  • PFE: Pfizer
  • BMY: Bristol-Myers
  • JNJ: Johnson & Johnson
  • CVS: CVS
  • UNH: UnitedHealth

Utilities

  • DUK: Duke Energy
  • NEE: NextEra Energy
  • AWK: American Water Works

Telecommunications

  • VZ: Verizon
  • T: AT&T
  • LUMN: Lumen

Consumer Staples

  • PG: Procter & Gamble
  • WMT: Walmart
  • COST: Costco
  • KO: Coca-Cola

Dividend Blue-Chip Stocks

  • IBM
  • JPM

Dividend ETFs

J.P. Morgan ETFs : covered call for premiums

  • JEPI: JPMorgan Equity Premium Income ETF, monthly, focusing technology, finance, healthcare in S&P 500
  • JEPQ: JPMorgan Nasdaq Equity Premium Income ETF, monthly, focusing Nasdaq 100

Schwab ETFs :

  • SCHD: Schwab U.S. Dividend Equity ETF, quarterly, focusing consumer non-durables, health, energy sectors

Invesco ETFs

  • SPHD: Invesco S&P 500 High Div Low Vol ETF, monthly, focusing finance, utility, consumer non-durables sectors

Vanguard ETFs

  • VYM: Vanguard’s High Dividend Yield Index ETF, quarterly

BlackRock iShares ETFs

  • IVV: iShares Core S&P 500 ETF, quarterly
  • DVY: iShares Select Dividend ETF, quarterly

Global X ETFs

  • XYLD: Global X S&P 500 Covered Call ETF, monthly

References