So hear me out. We are in a recession. And todays inflation has made people go exuberant. This somehow doesn't add up to me. I have a sneaking feeling all these people are the ones who took some losses but didn't get completely owned by the market yet. They want to feel the good times will continue. They fail to realize the economy has been dead for 2 years now. The only reason we made it was FED expanding it's balance sheet by gargantuan levels. Think about this, you and I were given literally FREE money during the pandemic. Retail participation in 2021 was higher than the cumulative 12 years before it. That's insane.
‘Across 352 spikes of inflation >7% in the world bank data, price stability was fully restored just 1.4% of the time’ https://www.macrodesiac.com/zoltan-says-the-quiet-part-out-loud/ . Keep in mind we're still at 8.6% inflation. Maybe inflation will come down, maybe it won't. But rest assured, FED won't start cutting till it's too late. And it takes time, it's not going to get under 2% this year. It's not going to be a touch and go recession either. Companies have contagion. There's too much debt laying around that simply cannot be processed at such high interest rates. Maybe FED will not raise. But if they don't cut in the next 6 months, many companies will go bankrupt simply at these interest levels. Credit card debt is rising really fast. I mean the 'second highest increase on record' fast. https://capital.com/blockbuster-us-jobs-report-hides-consumer-weakness The consumers are what took us out of the recession last time. This time there are no free checks coming and they are already choking. I guess the key point is, it's not about increasing or decreasing rates. It's about how much time will rates be at these levels. The longer the time , the tighter the hold of recession around the economy. Are you more likely to mortgage a house or buy credit card debt if the rate of servicing is this high? We needed $4T to get us going during covid, but now the trap is set completely. Maybe they won't tighten the hose MORE but they won't let go till we're choked either.
I do admit I'm a bear here. But I'm not an open one at all. I'm actually worried sharing this post here. Noone wants to hear this, or the fact that we're heading into a recession. I guess what I'm trying to say is, they didn't give you free money for the sake of it. They know they'll get it all back soon enough!
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