Risk of Recession

The probability that the U.S. economy will fall into recession within six months increased from 17% in April to 20% in May, but still remains low. Weakness in the labor market, a dip in equity prices, and a drop in consumer confidence pushed the probability higher. Based on the economic data, Moody’s Analytics believes that the economic expansion in the U.S. is still mid-cycle and has room to run. They generally see the U.S. dipping into recession when the probability reaches 60%.

 U.S. & World Equity Indexes; 6/30/16; YTD Return S&P 500; 2,099; 2.70% Dow Jones Industrials; 17,930; 2.90% Nasdaq Composite; 4,843; −3.30% Shanghai Composite (China); 2,930; −17.20% S&P BSE Sensex (India); 27,000; 3.40% Nikkei Stock Avg (Japan); 15,576; −18.20% CAC 40 (France); 4,237; −8.60% DAX (Germany); 9,680; −9.90% FTSE 100 (U.K.); 6,504; 4.20%
 Selected Interest Rates; 6/30/16; 5/31/16 15-Year Mortgage; 2.78%; 2.89% 30-Year Mortgage; 3.48%; 3.64% 5-Year Treasury Bond; 1.01%; 1.38% 10-Year Treasury Bond; 1.49%; 1.84% 30-Year Treasury Bond; 2.30%; 2.64%
 Key Economic Statistics; Most Recent; Prior Month National Producer Price Index; 0.50%; 0.40% Consumer Price Index; 0.20%; 0.20% Unemployment Rate; 4.90%; 4.70% ISM Manufacturing Index; 53.20; 51.30 ISM Services Index; 56.50; 52.90 Change in Non-Farm Payroll Emp.; 287,000; 38,000 New York State Consumer Price Index - NY, NJ, CT; 0.30%; 0.30% Unemployment Rate; 4.70%; 4.70% NYS Index of Coincident Indicators; 1.30%; 2.70%

RNFIB Small Business Survey

Small business confidence improved in June as the index increased from 93.8 in May to 94.5 in June. Small firms remain pessimistic about the economy over the next six months, but their capital expenditure plans have improved, even though confidence remains historically weak. Many small businesses cite the ability to find qualified workers as their biggest problem. One solution is to raise wages, which an increasing percentage of small firms plan to do; in addition, 16% of small firms say they plan on increasing prices in the next six months.

 Forté Capital
 Equity Market Statistics; 6/30/16; 5/31/16 Dow Jones Industrials Dividend Yield; 2.68%; 2.68% Price/Earnings Ratio (12 Mth Trailing); 18.41; 18.43 Price to Book; 3.04; 3.04 S&P 500 Index Earnings Yield; 4.70%; 4.70% Dividend Yield; 2.11%; 2.15% Price/Earnings (12 Mth Trailing); 21.28; 21.27 Price/Earnings (2016 EPS Est); 18.43; 18.29

The information herein was obtained from various sources believed to be accurate; however, Forté Capital does not guarantee its accuracy or completeness. This report was prepared for general information purposes only. Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities, options, or futures contracts. Forté Capital’s Proprietary Market Risk Barometer is a summary of 30 indicators and is copyrighted by Forté Capital LLC. For further information, visit www.fortecaptial.com, send a message to [email protected], or call 866-586-8100.