As the world obsesses over the inverted yield curve, some investors are pondering less conspicuous signs of impending doom.
For Mark Yusko, CEO of Morgan Creek Capital Management, what he calls the "four horsemen of the growthpocalypse" — 10-year Treasury yields, Brent crude, LME copper prices and the Korea Composite Stock Price Index, or KOSPI, — are flashing red recession signals.
"Those four horsemen are all in full gallop downwards, which is usually a bad sign," he said in an interview. "A lot of people are calling for a 2020 recession. [I] think that's a pretty good call."
Falling copper and oil prices signal an industrial slowdown, he said. Brent crude oil has fallen more than 20% since reaching this year's closing high of $74.57 per barrel on April 24, while Copper has declined 12% since peaking at $6,570 per tonne on the London Metal Exchange on March 1.
Korea's KOSPI index is a good indicator of economic activity since so many of its member companies supply the tech industry, Yusko said. It has dropped 14% since April 16, when it closed at 2248.63, its highest level this year.
Ten-year Treasury yields fell to an almost three-year low 1.53% on Aug. 15, down 125 basis points from this year's high of 2.78%, reached on Jan. 18.
"It's very clear low interest rates are a sign of economic weakness, high interest rates are a sign of economic strength," he said. "The fact that the Fed's talking about cutting interest rates tells you all you need to know about future economic activity."
The yield curve briefly inverted this week, when the 10-year yield dropped below that on the 2-year Treasury note. Yield curve inversions typically precede recessions.
Yusko is a bear who has been calling for a downturn for some years, but other data sources could be on his side this time.
U.S. job openings fell for a second straight month in June, according to U.S. Labor Department data, falling to a seasonally adjusted 7.3 million in June from a downward revised 7.4 million in May.
The average workweek for employees on private nonfarm payrolls fell to 34.3 hours in July after averaging 34.4 hours in both June and May, according to BLS data.
That shows employers are taking steps to deal with moderating growth, before limiting hiring or firing workers, according to Peter Boockvar, chief investment officer at Bleakley Financial Group.
"We're seeing a slowdown in hiring, and if this weakness continues and spreads, then you're going to see companies start to lay off people which then affects consumer spending," he said. "That's where I'm watching for to see if we get to that point, but it's more and more likely that we're heading in that direction."
