No one is talking about a recession today.

Folks are definitely more bullish than bearish. And why not?

This week, Nvidia (NVDA) briefly became the biggest public company by market capitalization.

It’s up 29,800% since August 2015 and is up 3,316% over the past five years.

But there’s one recession indicator flashing signs that there may be trouble on the horizon…

What if this is the market’s last hurrah before a recession hits? If it is, what should investors do? And what’s the “recession indicator” in question?

We’ll explain more below…

Lock in Gains Now

Although no one talks of recession today… that wasn’t the case as recently as a year ago.

This time last year, the prospect of a U.S. recession was everywhere. In fact, in late 2022, Bloomberg published an analysis suggesting a recession was 100% certain by the end of 2023.

But it never happened.

So, if a recession didn’t happen then, why are we suddenly revisiting the subject?

Well, as we’ve explained in recent weeks, our view is a recession likely won’t happen until 2025… perhaps not even until 2026.

For that reason, we’ve recommended holding onto stocks and resisting the temptation to sell as the market continues to reach new all-time highs.

Our one caveat has been to suggest taking regular, small cuts to your portfolio… to at least lock in some gains but not overdo it.

One strategy we’ve suggested is to just pick one of your stocks each week and sell a portion of it. That could be 10%, 20%, or 30%.

If we take the middle ground, you could sell 20% of each of your stocks over the next few weeks. That alone would help reduce your exposure to a falling market.

After all, what does our opinion matter? Just because we figure a recession and market crash isn’t about to happen soon… what if we’re wrong?

Once you’ve made those initial cuts, you could take off another slice over the subsequent few weeks.

It’s not a perfect strategy… and maybe it increases the paperwork at tax time… but we’ll take extra tax paperwork over a devastating loss anytime.

Getting back to the “recession indicator,” we refer to the copper price.

Investors often consider copper to be a bellwether for the economic health of the global economy.

When the market is booming, copper demand goes up. You need copper in housing, electric vehicles, and most technology. Not to mention other uses.

So when the economy isn’t doing so well, or folks figure the economy is turning down, the demand for copper slows… and that weighs on the price.

So let’s look at how the copper price has performed over the past five years:


Source: London Metal Exchange

You can see the two most significant price falls. The first was from late 2019 into early 2020. Remember that before the pandemic, the global economy was red hot. Stocks were at peaks. Central banks had increased interest rates in an attempt to slow the economy.

The next major drop was in early 2022. That was after stock markets had peaked again and recession talk returned. It was around that time most economists predicted a recession for 2023.

Now look at the right of the chart. The copper price peaked earlier this year. Since then, it’s down around 16% from that peak.

What does it mean? Is it a forewarning of recession trouble? Or is it just a seasonal drop? A recent story in the Financial Times gives us some context:

Copper inventories usually build up in the first few months of the year and start to be drawn down in the spring after the Chinese Lunar New Year holiday as factories increase production again.

However, this year, the rise in copper inventories has gone on longer than usual.

The rise in inventories tells us either supply has outstripped regular demand… or demand has fallen below expectations.

The next few months will tell us which is which for sure.

The trouble is, if you wait until then to make portfolio decisions, odds are it will be too late.

To repeat, we’re not saying a recession will hit and affect markets within the next few weeks. But look at the calendar. The year is nearly half over… we’re fast approaching 2025.

Markets and economies can only go on for so long without a major contraction. The next crash, while not here yet, is getting nearer by the day!

Take our advice. Now remains a good time to trim that portfolio of yours.



Kris Sayce
Editor, The Daily Cut