Markets stabilized some last week, stocks large, small, emerging and foreign finding a bid. Short covering for sure, but maybe some real buying too; there are a lot more cheap stocks around right now than there has been in quite a while. Value players are starting to pick around in the debris of the materials sector. Energy companies have found eager buyers for secondary stock offerings, a sign perhaps that a durable bottom hasn’t been found – yet. You’ll even find some steel, aluminum and iron ore companies among the big winners last week. It’s almost like everything is back to normal, the angst and panic of the beginning of the year rapidly fading in the rear view mirror. I think it would be a mistake to assume that the all clear has been sounded.

The economic data last week continued the pattern that has held over the last year. Weak manufacturing data alongside other data that isn’t nearly as disturbing. The Empire State and Philly Fed surveys are still in contraction, while the housing starts and permits continue to look fairly healthy. Or do they? Housing has been an important prop to the economy the last year so any slowing there is significant. And indeed the year over year rate of change is slowing, starts up just 1.8% from last year. Permits have done better, up 13.5% year over year but that is down from nearly 30% in the middle of last year – and permits can be canceled. Jobless claims continue to impress, near cycle lows. Despite the claims performance though, the leading indicators were down for the second straight month.

The question has been and remains whether the economy can avoid recession with the manufacturing/goods side of the economy already there. Frankly, I think it is a dumb question and I can give you an answer right now – no. It never has before and it won’t this time either. The list of indicators that are at levels or rates of change that are usually associated with recession is getting very long. The global economy is already in recession and its effects are being felt in the US right now. S&P recently reported that 394 companies in the US cut their dividends last year, a 38% increase from 2014. The last year with a higher number was 2009 in the aftermath of the Great Recession. In fact, last year was 23% higher than 2008. And no it wasn’t all energy companies but one could say that the vast majority were companies hurt by a rising dollar. Curiously, the last time the dollar rose so rapidly was….2008. And things haven’t improved in the New Year, with a cumulative 40 cuts already. Dividend cuts of that magnitude happen in or around recession.

Or we could look at trade which is really what will drive the inflection point to which the title refers. Both imports and exports are down more than 5% year over year. You won’t find numbers like those in the available historical data outside of recession. And it isn’t just the US; global trade peaked in the 3^rd quarter of 2014 with all the major economic areas of the world suffering to some degree from China and Japan to Europe and the US. Emerging markets like Brazil that are dependent on commodity exports are in deep recession, a victim of the global slowdown and a strong dollar. You can call it what you want but if global trade is shrinking we’ve got a serious problem with the global economy.