Quarterly Conversations – Third Quarter Recession Outlook

Featuring: P.J. Gardner

Are We Headed for a Recession? In this video, AGW Principal & Co-Founder P.J. Gardner, CFA®, CFP®, CIMA®, discusses the current economic climate and whether or not we are headed for a recession. This conversation was recorded on August 7, 2023, and reflects information available at that time.

Audio Only


  • Leading economic indicators at their lowest points
  • The Fed’s rapid rate hikes
  • The decline in the money supply
  • The inverted yield curve

Full Transcript

So, gosh, it’s a fascinating time in the economy. When you think about just basic principles, everything tells you we should be in a recession. And yet the most recent GDP figure came in at 2.4%. So the question is, are we truly going to avoid a recession? Or are we just delaying the inevitable?

The quote that comes to mind is one that Nassim Taleb used in his books, “Absence of evidence is not evidence of absence.” And it’s not yet, but gosh, everything is flashing yellow and red as far as what’s to come.

The easiest thing to look at is leading economic indicators. And they’re some of their lowest points that you see, all of which are consistent with recessions. If you look at lagging indicators, which seems to be what the Fed is focused on, they’re still doing okay. But again, the Fed seems very determined to knock those out. And all you have to do is look at what they’re doing.

They have raised rates at one of the fastest rates that they ever have, moving from a zero-interest rate policy today to something like five and a half.

Interestingly, on that, it seems like the market right now believes that they’ve reached their peak and will then roll over some time, probably late first quarter of next year. I’m not sure.

Since this whole time, we’ve been telling our clients that the risk is to the upside, and it still feels that way to us. Yes, CPI is down to 3%. I think, in no small part, that’s a money supply phenomenon, and we’ve seen the money supply move to extraordinary highs to now actually contracting, which is very rare. And the yield curve is in is incredibly inverted.

So all those things point to a recession. And as I’ve said before, we’d like to think probabilistically, not in absolutes. It’s possible that the Fed may engineer a soft landing, and we’ve seen the heights and rates, but our hunch is to be careful.

Sell into the strength that the markets are giving you and bolster your reserves. You’re getting paid handsomely on those, and make sure if a storm comes, you’re ready.

AGW Capital Advisors is a registered investment adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a member of the AGW team, another qualified financial adviser, and/or tax professional before implementing any strategy discussed herein.