While 2022 was a terrible year for almost every kind of investor… it was a terrific year for workers.
Almost 5 million jobs were created in 2022. And so far, 2023 looks to be almost as good.
Yet the first jobs report of 2023 shocked the stock and bond markets and sent prices skidding. What gives?
The truth is this job market isn’t what it seems – it could actually cause a recession. That could mean serious consequences for your portfolio if you’re not prepared for what’s to come.
Here at Intelligent Income Daily, we’re focused on equipping you with the knowledge you need to navigate uncertain economies and make safe, reliable income for years to come, no matter what they may bring.
Today, I’ll reveal why this growing job market could squeeze out more money-draining action from the Fed… and how you can invest like the wealthy to sidestep the fallout and protect your portfolio.
The Truth Behind A “Thriving” Job Market
We’ve far surpassed expectations for job numbers in recent months.
Economists had expected job growth to keep slowing gradually in January to a solid 185,000, down from 223,000 in December.
Instead, we got 517,000 new jobs, and December’s numbers were revised to 266,000.
On top of that, unemployment fell to a 54-year low of 3.4%. And in the last three months, we’ve averaged 350,000 monthly jobs. That’s an annual rate of 4.2 million, almost as good as 2022’s 4.6 million jobs.
So why would the markets tank in response to these blowout job numbers? Normally, higher employment means more money in consumers’ pockets. In normal times, this should be good news.
But we’re not in normal times. We’re in a post-pandemic environment, where the cost of goods and services are elevated higher than before – and that’s where the problem lies.
While 70% of the U.S. economy is driven by consumer spending, 66% of what consumers buy are services, i.e., “non-goods.”
See, it’s not just the price of goods and products – like eggs, cars, and fuel – rising in recent months. There are also the elevated costs for labor and other services.
And while commodity and goods prices have fallen since their highs last year, service inflation is still too high and will only get higher if job growth continues.
Simply put, more jobs mean more wages to pay. And that offloads to higher costs of services and goods. So, we’re right back to a still pretty high inflation rate.
The Federal Reserve fears that if unemployment doesn’t go higher, high wages will make overall inflation get stuck around 4% to 5%. That’s more than 2X its official goal.
That can spell disaster, both for companies and the U.S. government, who will have to refinance trillions in debt in the coming years.
And we all know the Fed won’t stand for it…
Recipe for a Recession
The Fed correctly understands that it must cut down inflation and do so quickly. It will keep hiking rates to cool the job market… And that’s what could cause a serious recession.
You see, it takes 12 to 18 months for a rate hike to make its way through the economy. And the Fed started hiking rates in March 2022. That means most of the effects of the 4.5% hikes we’ve seen so far haven’t made it into the economy yet…
But wages are sticky. And once workers get them, they don’t easily give them up. This is why if the job market stays this tight, it could force the Fed to hike another 1% or even 1.5%, according to some economists.
That would bring the Fed funds rate to 5.5% to 6%. And combined with the strongest reverse money printing in history, that would mean an effective interest rate of approximately 7.5% to 8%, according to the San Francisco Fed.
And that’s exactly the worst-case scenario most economists think could cause not just a mild recession but a severe and protracted one.
The kind of recession that 98% of global CEOs now expect, according to a January 2023 survey from Ernst & Young…
The kind of recession that could send stocks down another 30% from here, making 2023 another terrible year for investors…
Fortunately, there’s a proven way to stay safe and sane and profit from such risk.
The secret to avoiding crashing your own portfolio is what the rich have been doing all along: Investing in the companies that have not only weathered recessions but grown from them, too.
That’s what I and the Wide Moat team are dedicated to bringing to you through our research…
A Long-Living Dividend Aristocrat
For our paid-up Fortress Portfolio subscribers, we’ve constructed portfolios that combine to create the most effective hedging strategy of the last 42 years, averaging a 25% gain while stocks fall 27% in bear markets.
But today, I’ll share with you a free recommendation that could set you up for impressive profits.
Carlisle Companies (CSL) is a Dividend Aristocrat (meaning a company with a 25-year-plus track record of dividend raises) that’s been raising its dividend for 46 consecutive years.
Founded in 1917, it has survived and thrived through 20 recessions and depressions over 106 years.
This industrial legend makes fluid control systems for car companies, the aerospace industry, and many other industries. It’s been raising its dividend at double-digits for 20 years, including through the Pandemic and Great Recession.
Today, Carlisle is growing at 16% and is nearly 40% undervalued, trading at less than 12X forward earnings. It’s so undervalued, it could deliver 105% total returns in the next three years, or a 27% annual return.
It’s one of the most dependable dividend blue-chips in history that’s been raising its dividend every year since 1977.
This is the kind of company you can safely buy for 2023 no matter what happens with interest rates, inflation, the Fed, or even the economy.
Safe Investing,
Adam Galas
Analyst, Intelligent Income Daily
P.S. Our goal is to create robust portfolios that can help you sleep well at night. That’s why we launched Intelligent Income Investor. It spans three portfolios of the best income-producing assets that have proven their resilience over decades.
To learn how to get our full list of these companies, click here.