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 1. Home
 2. Latest Thinking
 3. Anatomy of a Recession
    


U.S. ECONOMY: ANATOMY OF A RECESSION

Where do we stand - and what should we watch for in the coming months?
December 2022 Video Update



Program OverviewExplore Our Interactive DashboardResourcesInsights


MONTHLY INSIGHTS TO HELP YOU STAY IN FRONT OF THE U.S. BUSINESS CYCLE

ClearBridge Investments, a specialist investment manager of Franklin Templeton,
designed the Anatomy of a Recession (AOR) program to deliver thoughtful
perspective on the state of the US economy with concise, practical views updated
every month. Our exclusive recession risk and recovery dashboards provide the
statistical foundation of our perspective. Watch the video to hear more about
the program from Investment Strategist Jeff Schulze. and use the tabs below to
explore the current market views.

Anatomy of a Recession


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Recession Risk
 * Recession Risk
 * Recession Risk by Comparison
 * Case Study
   


RECESSION RISK

U.S. RECESSION RISK INDICATORS

    December 31, 2022 August 31, 2022 July 31, 2022 June 30, 2022
Consumer
Housing Permits Job Sentiment Jobless Claims Retail Sales Wage Growth
Business Activity
Commodities ISM New Orders Profit Margins Truck Shipments
Financial
Credit Spreads Money Supply Yield Curve   Overall Signal

 

Expansion    Caution   Recession

 

A recession is a significant decline in economic activity spread across the
economy, lasting more than a few months, normally visible in real GDP, real
income, employment, industrial production, and wholesale-retail sales. A
recession begins just after the economy reaches a peak of activity and ends as
the economy reaches its trough. Between trough and peak, the economy is in an
expansion. Expansion is the normal state of the economy; most recessions are
brief and they have been rare in recent decades.
Data as of December 31, 2022
Source: ClearBridge Investments, BLS, Federal Reserve, Census Bureau, ISM, BEA,
American Chemistry Council, American Trucking Association, Conference Board, and
Bloomberg. The ClearBridge Recession Risk Dashboard was created in January 2016.
References to the signals it would have sent in the years prior to January 2016
are based on how the underlying data was reflected in the component indicators
at the time.





RECESSION RISK BY COMPARISON

U.S. RECESSION RISK INDICATORS

    Current 2020 2007-2009 2001 1990-1991 1981-1982 1980 1973-1975 1969-1970
Confidence
Housing Permits Job Sentiment Jobless Claims Retail Sales Wage Growth
Economic
Commodities ISM New Orders Profit Margins Truck Shipments n/a n/a
Financial
Credit Spreads Money Supply Yield Curve   Overall Signal

 

Expansion    Caution   Recession
 

Data as of December 31, 2022
Source: FactSet, Bloomberg, Conference Board, Census Bureau, Federal Reserve,
FRBPA, Chicago Fed, ISM, Dept. of Labor, Bloomberg/Barclays, AAII, Investors
Intelligence, and Moody’s.




CASE STUDY

1990 RECESSION

 



    Q2 1988 Q4 1988 Q2 1989 Q4 1989 Q2 1990
Consumer
Housing Permits Job Sentiment Jobless Claims Retail Sales Wage Growth
Business Activity
Commodities ISM New Orders Profit Margins Truck Shipments
Financial
Credit Spreads Money Supply Yield Curve

 

Source: S&P, FactSet, NBER, and Bloomberg.




U.S. RECESSION RISK INTERACTIVE DASHBOARD

ClearBridge Investments utilizes twelve different economic indicators to assess
the risk of recession. This interactive version of our exclusive Recession Risk
Dashboard allows you to vary the settings for each indicator based on different
scenarios that reflect your own views of future conditions.

 * Each indicator is set to reflect the Dashboard’s current positioning, which
   is updated monthly, using the most recent data available.
 * Slide the toggle for each indicator left or right to test the market impact
   of your own “what-if” scenarios.
 * Click the icon next to each indicator for more information about the
   individual indicator.

Note each individual indicator can signal expansion, caution or recession in the
economy. The signals from each of the twelve indicators are combined into an
overall dashboard signal of green, yellow or red. The indicators, signals and
changes are based on the ClearBridge interpretation of the data and analysis.
The data is supplied by ClearBridge Investments, a Franklin Templeton
subsidiary. The ClearBridge Recession Risk Dashboard is not a crystal ball, but
can serve as a tool to evaluate the risk of recession in the U.S. economy.


FINANCIAL

Yield Curve

 * Cycle Highs
 * Steepens Further
 * Modestly Steeper
 * Slightly Positive
 * Stable
   

- Cycle Highs Steepens Further Modestly Steeper Slightly Positive Stable +

Credit Spreads

 * Near Prior-Cycle Lows
 * Near Historical Averages
 * Lower
 * Modest Narrowing
 * Stable
   

- Near Prior-Cycle Lows Near Historical Averages Lower Modest Narrowing Stable +

Money Supply

 * Substantial Growth
 * Material Increase
 * Increase
 * Slight Increase
 * Stable
   

- Substantial Growth Material Increase Increase Slight Increase Stable +


INFLATION

Wage Growth

 * Near Prior-Cycle Lows
 * Substantial Weakening
 * Lower
 * Modestly Lower
 * Stable
   

- Near Prior-Cycle Lows Substantial Weakening Lower Modestly Lower Stable +

Commodities

 * Substantial Strength
 * Material Pickup
 * Pickup
 * Normalization
 * Stable
   

- Substantial Strength Material Pickup Pickup Normalization Stable +


CONSUMER

Housing Permits

 * Substantial Pickup
 * Improvement
 * Modest Strength
 * Stable
 * Further Contraction
   

- Substantial Pickup Improvement Modest Strength Stable Further Contraction +

Jobless Claims

 * Near Prior-Cycle Lows
 * Stable
 * Modestly Higher
 * Substantial Increase
 * Recessionary Spike
   

- Near Prior-Cycle Lows Stable Modestly Higher Substantial Increase Recessionary
Spike +

Retail Sales

 * Substantial Strength
 * Material Improvement
 * Improvement
 * Slight Improvement
 * Stable
   

- Substantial Strength Material Improvement Improvement Slight Improvement
Stable +

Job Sentiment

 * Cycle Highs
 * Improvement
 * Slight Improvement
 * Stable
 * Downside
   

- Cycle Highs Improvement Slight Improvement Stable Downside +


BUSINESS ACTIVITY

ISM New Orders

 * Cycle Highs
 * Substantial Improvement
 * Improvement
 * Slight Improvement
 * Stable
   

- Cycle Highs Substantial Improvement Improvement Slight Improvement Stable +

Profit Margins

 * Near Prior-Cycle Highs
 * Substantially Wider
 * Wider
 * Modestly Wider
 * Stable
   

- Near Prior-Cycle Highs Substantially Wider Wider Modestly Wider Stable +

Truck Shipments

 * Material Improvement
 * Stable
 * Further Downside
 * Substantial Decline
 * Collapse
   

- Material Improvement Stable Further Downside Substantial Decline Collapse +

Expansion

Caution

Recession

The current dashboard is updated by ClearBridge Investments as of 12/31/2022

RESET INDICATORS TO CURRENT

All investments involve risk, including loss of principal. Past performance is
no guarantee of future results.

Any information, statement or opinion set forth herein is general in nature, is
not directed to or based on the financial situation or needs of any particular
investor, and does not constitute, and should not be construed as, investment
advice, forecast of future events, a guarantee of future results, or a
recommendation with respect to any particular security or investment strategy or
type of retirement account. Investors seeking financial advice regarding the
appropriateness of investing in any securities or investment strategies should
consult their financial professional.




RESOURCES

Anatomy of a Recession December Video Update


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ANATOMY OF A RECESSION PRESENTATION

View the latest comprehensive slide deck.

Download PDF
PDF Icon



ANATOMY OF A RECESSION PRESENTATION – SHORT VERSION

Take a look at the latest abridged Economic and Market Outlook slide deck.

Download PDF
PDF Icon



ANATOMY OF A RECESSION: ECONOMIC AND MARKET OUTLOOK FLYER

This flyer provides a current market and economic outlook based on ClearBridge
Investments Anatomy of a Recession program.

Download PDF

INSIGHTS


EXPLORE CLEARBRIDGE INSIGHTS

View More

DECEMBER 31, 2022

THE LONG VIEW: THE MOST ANTICIPATED RECESSION EVER

ClearBridge Investments: The timing and depth of a downturn could be impacted by
the Fed’s response to lagging indicators.

DECEMBER 2, 2022

AOR UPDATE: IS LABOR MARKET ECONOMIC KEVLAR OR ACHILLES HEEL?

ClearBridge Investments: While the labor market remains an economic bright spot,
the Federal Reserve (Fed) may continue its tightening policy until more signs
emerge that job growth and wages are experiencing substantial slowdowns.

NOVEMBER 1, 2022

AOR UPDATE: REMAIN PATIENT AMID MARKET GYRATIONS

ClearBridge Investments: Given the historical bump for stocks following midterm
elections, the current countertrend rally could have legs as political
uncertainties abate.



Franklin Distributors, LLC. Member FINRA/SIPC. Prior to July 7, 2021, Franklin
Templeton Distributors, Inc., and Legg Mason Investor Services, LLC served as
mutual fund distributors for Franklin Templeton.

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