I am sitting on the sidelines with cash waiting to be deployed. I am still of the view that a recession in 2019 is unlikely. However, I would rather be defensive at this point. The market has had good returns and I am happy to cash out and wait on the sidelines. A lot of psychological and technical damage has been done to the market. It will need time to repair.
There are two points that have caused me to worry the past few weeks. First, the money supply is still stagnant. This is unusually for this time of year.
Looking more closely at other week moving averages shows the M1 components have fallen off a cliff.
Second, the yield curve is getting flatter and looks ready to invert sometime in 2019.
I want to emphasize that if these trends do not reverse there will be a recession. However, there is a good time lapse between these events happening and a recession.