1) The economy is accelerating hard in 2023, which cannot be “gratifying” to Powell. They were hoping for steady deceleration, which just isn’t happening.
No landing = hard landing is a good take from Michael Hartnett.
Bearish charts, followed by more positive ones next tweet.
No landing = hard landing is a good take from Michael Hartnett.
Bearish charts, followed by more positive ones next tweet.
2) Most positive fact for the market is that we are going through the most rapid decline in job openings without a recession in modern American history. Job switchers were driving inflation, so super positive.
Charts on this:
Charts on this:
3) Basically, the odds of a soft landing were going vertical in November/December but then the economy started accelerating hard in January. Led by housing/autos which effectively are the cycle as recessions best understood as changes in replacement cycles for durable goods.
4) Unless there is more political pressure applied to the Fed (mkt up 96% of year 3s in Presidential Cycle as year 3 drives reelection), then “No Landing likely = Hard Landing.”
Political pressure began with Lagarde and then Yellen ramped it up on October 11. We will see.
Political pressure began with Lagarde and then Yellen ramped it up on October 11. We will see.
5) Fed’s problem is that while markets are rate sensitive, the economy has become much less rate sensitive overall.
Fx of vastly more fixed rate mortgages (everyone learned their lesson in 08/09) and excess savings (many consumers are debt free 1st time ever).
Fx of vastly more fixed rate mortgages (everyone learned their lesson in 08/09) and excess savings (many consumers are debt free 1st time ever).
6) Economy may now be more sensitive to gasoline prices than rates right now, which is wild.
Economy will become more rate sensitive as excess savings burn off and/or rates go higher (exponential relationship IMO).
Yes, aware of lagged impact of rate increases.
Economy will become more rate sensitive as excess savings burn off and/or rates go higher (exponential relationship IMO).
Yes, aware of lagged impact of rate increases.
7) There is actually a reasonable case to be made that circa 60% of consumers (outside the top quintile) are *positively* exposed to rates until excess savings burn off.
The upside down. And increases the odds that the Fed has to break something.
The upside down. And increases the odds that the Fed has to break something.
8) TLDR: Economy is accelerating rapidly and “No Landing likely = Hard Landing” absent political pressure on Fed.
9) The last time I was this tuned into macro was 2008-2010. I’ll never forget Mike Goldstein saying that bear markets and recessions generally end when every PM has a nuanced macro view. Very true.
10) Finally, I will just say that the resilience of the market this week was surprising to me. Especially the close on Friday.
11) Appending as I was clearly not definitive enough. The economy accelerating is not good news.
No landing = hard landing (more Fed hikes) absent political pressure.
Need the economy gently decelerating and job openings continuing to decline for soft landing. Not happening rn
No landing = hard landing (more Fed hikes) absent political pressure.
Need the economy gently decelerating and job openings continuing to decline for soft landing. Not happening rn
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