Gentlemen, it’s time to check your undies. Former Federal Reserve boss Alan Greenspan once suggested that when men stop investing in new jocks it’s a sign of a recession on its way. The idea even has its own name: the men's underwear index (MUI), with some analysts suggesting a recession could be brewing, so it might be time to stock up.
A more conventional recession red flag is the relentless rise of inflation. 🚩🚩 As portfolio manager Ben Carlson points out, since 1940 every time inflation in the US has risen above 5%, a recession - aka, two consecutive quarters of declining GDP – has shortly followed. Recessions are a regular part of the business cycle and in the US they’ve occurred on average once every 5.9 years. Still, nothing about the last few years has been average. And with strong US employment and high household savings, plenty of analysts think a recession may not happen. Even the New York Federal Reserve, which looks at bond yield curves rather than the state of our undies, thinks the probability of a US recession this year is just 6%. Recessions don’t mean we need to switch to eating lentils and taking the bus, but often company sales and earnings will fall as consumers spend less money. 📉
In times of recession though, not all companies are created equal. Petco (WOOF) CEO Ron Coughlin thinks our love for floofy friends means ‘the pet market continues to grow’. 🐶 Other companies that have held up in times of recession past have been those we use all the time, like utilities, consumer staples and… dating stocks? Yep, when the going gets tough, the tough get… swiping? Tinder owner Match Group (MTCH) saw big spikes in members during the 2009 recession, while daily active Tinder users reached all-time highs during the depths of the Covid crisis. Just be sure to wear your best recession undies. 🩲