All of the financial media, from ZeroHedge to CNBC, has published endless articles about how May could be the last rate hike by the Federal Reserve because the economy is rapidly weakening. The idea is that a Fed pivot will come where suddenly the Fed begins to rapidly lower rates. Up until about a week ago, the Fed Funds Futures chart also supported such a scenario. But now the curve is showing that rates don’t come down until September.

We’re even starting to see the pricing in of a rate hike in June.

Wells Fargo Says No Rate Cuts In 2023

Wells Fargo doesn’t expect the Federal Reserve to cut rates in 2023, but it sees the economy eventually entering a recession this year.

High inflation and high interest rates are holding back the economy and the Fed is not done hiking rates. Wells Fargo doesn’t expect a pivot to rate cuts until policymakers are confident inflation is on pace to hit their 2% target, which they say won’t happen before 2024.

Wells Fargo expects the Fed to raise rates by 25 basis points at both the May and June meetings.

The Conference Board’s Leading Indicators

The Conference Board’s Leading Indicators Index points to an immenent recession. The March reading dropped 1.2%, declining to its lowest level since November 2020 and marking a 12th straight month of contraction. The Leading Indicators index suggests that economic weakness will intensify and broaden throughout the economy in the coming months, leading to a recession starting in mid-2023.

Stocks/Markets That Do Better In a Recession

Stocks that tend to do well in a recession are:

1. Consumer staples companies: These are companies that sell everyday basic goods like food, beverages, and household items that people need regardless of the economic situation.

2. Healthcare companies: People still need healthcare services even in a recession, so healthcare companies tend to be relatively stable during economic downturns.

3. Utilities companies: These are companies that provide essential services like electricity, gas, and water, which people still need even in tough economic times.

4. Discount retailers: People tend to cut back on spending during a recession, so discount retailers like Walmart and Dollar Tree tend to do well.

5. Gold: Gold is often seen as a safe haven investment during times of economic uncertainty, so the price of gold tends to go up during recessions.

Over the last month, Utility stocks are up 6.05%, Consumer Staples stocks are up 5.32%, and Healthcare stocks are up 5.14%.