All the talk about whether we're going into (or not) or are already in a recession, and whether it will be hard or soft, IMO is simplistic. Given the economic stratification of any society, I think it likely that it has already hit the “classes” in different ways.
Very basically, lower economic classes have never recovered from the lockdowns and have been in or on the edge of recession since. The middle class is now feeling the pinch of the highest inflation many of them have known in their adult lifetimes, even though it's not even in the top ten of historical inflation rates in the U.S. There are indications that they're having to make the decision of reducing discretionary spending or pushing off the debt in a climbing APR environment. For them, a recessionary effect on their finances may seem a case of when, not if. The wealthy, well they'll weather the storm and buy distressed properties at a discount like they always do.
I heard on NPR that yesterday's volume was about 60% of normal. I read elsewhere that the market has already factored in a 75-100 basis point hike coming Wed. Then I see reports that a lot of smaller investors are moving to the sidelines. And OFC, trading volume will be lighter until Labor Day.
I can't say I've calculated the trajectory of all these asteroids and can plot a safe course, so to speak. It does seem that we're in for a couple of months of increased volatility, though.
Also, I'd pay less attention to the rate hike number and more to the directional comments after. The tone of whether they'll continue to go hard after inflation, or wait for the economic market data to guide them will, IMO, guide the fund mgrs.
Leave a Reply