Northwestern Mutual Wealth Management's mysterious bet on long-term government bonds in June has come to light. BlackRock's $2.7 billion bet on the 20-year Treasury bond ETF (TLT) shook the bond market and sparked speculation of an impending recession.
According to Bloomberg, the company's chief investment officer Brent Schutte admitted to the massive purchase, saying it was a strategic move ahead of a possible recession caused by a cooling labor market.
Given the recent rally in government bonds, the bet appears to have paid off quickly for the $300 billion investment manager. The company said it plans to hold the TLT position in its retail portfolio for at least a year.
As reported by CryptoGlobe,
"troubling
" economic indicators in the U. S. point to an impending recession, after accurately predicting one for the past 75 years.
Such an indicator is the U. S. unemployment rate, which has risen for four consecutive months. Over the past 75 years, every time the unemployment rate has risen for four months in a row, the economy has fallen into recession.
The recession indicator comes shortly after another key recession indicator triggered the rise in the U. S. unemployment rate last month, leading to a massive $5 trillion sell-off in stocks.
The rise in unemployment triggered a recession indicator called the Sahm rule. The Sahm rule compares the three-month moving average of the U. S. unemployment rate to the lowest value of the previous 12 months and is triggered when the unemployment rate rises 0.5% from its lowest value.
According to Investopedia, the Sahm rule is named after Claudia Sahm, a macroeconomist who worked at the Federal Reserve. According to Yahoo Finance, Thurm herself said that the unique labor market dynamics following the COVID-19 pandemic may make the rule less useful for identifying recessions.
Bloomberg reports that JP Morgan recently raised the probability of a recession in the U. S. economy this year to 35% from 25% a month ago. Schutte says the labor market is "usually the last to break" before a recession. He says that:
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