Worrying about a hard landing
Worrying about a hard landing
The Fed is staying hawkish in the face of an ever-cooling economy
I wrote last time that I was growing concerned about the economy, and I was looking for the Fed to start jawboning some dovish comments. The biggest risk to equities is now that the Fed remains overly hawkish in the face of weakening data, and sends us into recession.
Payrolls are coming out Friday. Recent economic data leads me to suspect we will get a weak number.
Two outcomes are possible on a weak number:
We turbo price cuts for the next 8 meetings. Equities and gold pump. The world comes to a consensus: Inflation is beaten and now it’s time to add liquidity.
We have the same reaction but instead of the world coming to consensus, that PA fades. The Fed remains hawkish, continues to live in the past, and we get a big sell off.
I’m increasingly concerned about option 2.
Neil Dutta did a good interview on Jack Farley’s excellent Forward Guidance podcast where he talks about these same concerns. He put it better than I would, so I suggest jumping over and listening to that now.
Consumer Data
Consumer data has been coming in consistently weaker than expectations. We have flipped since this time last year, when numbers were consistently beating expectations and everyone was waiting for a recession.
Now, every number is worse than expectations and most people are not expecting a recession.
Looking to the Future
There are still plenty of outcomes in which we do not have a recession, and I remain bullish risk assets. I am expecting liquidity to begin ticking upward Soon™️. Still, I’ve said for a long time we need to stay alert and aware, and crunch time is coming.
I will check in again after we get payroll numbers on Friday. I think that number, and the reaction, will tell us a lot about what’s to come.
Please also always remember... none of this is financial advice. I’m not a professional. I quite literally don’t know what I’m doing. I’m just a guy, with a keyboard, who scored high enough on some standardized tests to think I can beat the market.