Yes, that was the first, powerful “Recession Trade” day I’ve seen in a LONG time. The question is, should you worry?
Take a look at my MoneyShow Chart of the Day. It shows the intraday move through late afternoon on Thursday for several ETFs. They include defensive sector funds like the State Street Consumer Staples Select Sector SPDR ETF (XLP) in green, offensive sector funds like the State Street Technology Select Sector SPDR ETF (XLK) in blue, and funds that track volatility (orange) and long-term US Treasuries (red).
The “Recession Trade” – in Six ETFs
Source: TradingView
What do you see? A spike of more than 3% for the iPath Series B S&P 500 VIX Short-Term Futures ETF (VXX), a rise of 0.8% for the iShares 20+ Year Treasury Bond ETF (TLT), and a BIG gap between offensive and defensive sector performance...with defense “winning.” I didn’t show it, but I could’ve also highlighted that riskier bond ETFs underperformed government bond funds.
The day also featured Meta Platforms Inc. (META) getting body slammed – in both the equity AND debt markets. The catalyst? A filing that said Meta would spend $825 billion on AI-related leases, contracts, and other obligations in the future. That was up sharply from the $700 billion it had reported in July.
Does ONE day like yesterday mean we’re going into a recession? Of course not!
But I’m calling out the action because it was severe. It was also something we haven’t seen in a while. And if we start stringing more of these trading days together, it’ll be time to adjust your trading strategies!
