I admit that the economy so far has surpassed my expectations. I was expecting a recession and unemployment upticks in Q3-Q4 of last year and that didn't happen. At the same time: yield curve has been inverted for well over a year. UK is now in a recession. USA was in a GDP recession which got shrugged off.
Am I the only one also who is concerned that the entire S&P 500 rally is basically NVDA plus a few other tech stocks? Small cap is seriously lagging which suggests to me that aggregate demand isn't as robust as what sentiment seems to be.
I think people expected more of a shock from the Russia-Ukraine war as far as energy prices, and that didn't really happen in the US since the Permian is producing tons. That being said, I'm just not seeing a soft landing. I think that might have been on the table if we had a slightly soft January jobs number which could have given the Fed slack to cut rates. A March rate cut is now basically off the table especially after the higher than expected inflation. Because of that, I think high rates are eventually going to make something break. March will be interesting when the BTFP facility goes away.
What are you all seeing? Open to disagreements. I kind of expect this topic to go to hell in a handbasket since it's an election year so people are going to weave a narrative to support their candidate. Sticking to the data though, I think we got more downside. Unemployment is a lagging indicator.
A lot of people keep pushing the soft landing narrative not remembering that the fed or as a matter of fact any central bank in the world has ever managed to succesfully pull it off.
Interestingly, the reason the economy has fared well thus far has been due to covid (ironic i know), people were able to save a lot of money but now, savings are at all time lows and credit card debt is at an all time high.
I suspect that the economy will get "whipped" into a pretty serious downturn. Currently, we are at the point where the economy is steadily decreasing, but I think we are going to see a pretty sudden downturn by Q4 2024. The $2 trillion corporate debt wall is entering maturity this year and next year, and all of these companies will need to finance into rates almost double what they had initially. Further, consumer debt is at an all-time high and consumer savings is at a low point with continued heavy spending. With all of these factors alongside significant negative global pressures from war on supply chains, oil prices, etc., I don't see how the economy could have a "soft landing." Just my 2 cents.
Economy sucks, I didn't buy the dip!
For the MS throwers, in all seriousness I'd be curious to hear your bull case if you disagree. I'm not even mad.
I don't disagree with anything you've said tbh. Yes, the entire market is being pushed up by a few titans/tech stocks, and sentiment as a collective doesn't seem to be all there. But, household net worth is at an all time high, wages at highs, multi decade low unemployment, retail sales at an all time high, and inflation numbers last week signal a come back. The data honestly just doesn't show any weakness. Some of the credit card delinquency data is from smaller companies and nothing out of the ordinary, and mortgage rates even at 7% isn't slowing down housing.
You mentioned something about soft landing, but core PCE has been at 2% for quite some time now and we are also at <4% unemployment. Is that not the FED's dual mandate? You're right in the sense that they're holding rates steady and something may break eventually, but it's been 2 years since the FED pivot and the economy is resilient regardless. I'll admit over the surface everything looks okay, but there may be deeper issues. Let me know what you think
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