Well....there goes the US Economy. Hard Landing Incoming
Unemployment rates started to increase finally. CPI is coming down slowly, and the banking sector (regional) is starting to show weakness with the collapse of SIVB. Other regional banks are now trying to prevent a bank-run. The average regional bank was down 20% today. Here's the best part, JPOW is gonna keep hiking away. If he doesn't pause within the next 2 meetings, I think it's entirely possible we see a miniature 2008 scenario. The Tier 1,2,3 banks are all in great shape (passing their stress tests with flying colors), this is the only reason I don't think we'll have a full-blown 2008 meltdown.
If this turns out to be the case...who knows, maybe he'll be forced to cut rates, but that's just speculation. I can't help but feel bad for the average American. They have no clue what's going on, but they're seeing their savings diminish, cost of living increase, and now their pension funds are getting F*****.
idk, lemme know what you think. RIP SIVB, you were a great bank.
I think we are a ways off from a big rise in UE. It went up today was because LFP % increased back to pre COVID peak.
The only crack in labor so far has been a flat/negative manufacturing and durable goods payrolls and temp hiring. Claims are still really low
The feds fickleness won’t help. It seems every meeting they stress different variables (UMich inflation expectations in June, used car prices in 2021, core pce ex housing now). As long as we see the occasional CPI beat occur this year he will continue to hike.
IMO only scenario where he cuts amid high inflation would be if credit spreads blew out/an actual bank failed. I think the concern around SVB is just FUD
FDIC has taken over the keys at SVB…
I agree with most of it. But a financial meltdown is a lot worse than inflation. If other regional banks start dropping one-by-one, you'll see the FED quickly pivot. The market will panic and I think that will end up marking the bottom. Regardless, the above is disinflationary, it'll just take some time to see it in the data.
The FED needs to pause and wait until the market prices in the cumulative impact of his rate-hikes.
Yep agree that meltdown is worse
I’m led to believe SVB failure was idiosyncratic. They had a concentrated deposit base (mostly VCs) and took a bath investing those deposits into MBS at all time low interest rates. So VCs deposit growth really slowed down in 2022 and they took huge losses on this MBS trade
But you’re right a lot of these west coast banks are getting smoked today. So something to keep an eye on
they have to keep raising. inflation is crushing people and its not getting better.
i was a big proponent that they were too late to raise, and raised by too little. they should have ripped the band aid off.
Debt ceiling maxed out, inflation through the roof - yet she is travelling around the world giving away billions...
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