Slight Concession

Back in January of 2022, our group stated that our economy is in a "stealth" recession. No one else agreed. Last week in the Fed's minutes, they said that they now see a recession within the economy. They did not date the occurrence. They did say that unemployment could reach 4.5%. If it takes 150,000 to move one tick, this translates to 1.5 million more unemployed.

We scanned the market. We found many reports indicating that a recession is knocking on the door. We stand by our call. One notable investor, Jeremy Grantham, sees what we see: Stagflation is slowly wrecking earnings and causing havoc to consumers. Then, we saw this...

Bank of America Report

The bank report lists factors that could direct the economy into a "full-blown" recession. They see the market believes that a rate cut is coming and a lack of fear by investors.                             

1) Manufacturing fell below the break-even point of 50. It resides at 46.3 with a poor outlook.                2) When you get lower manufacturing, lower earnings follow.                                                                    3) The yield curve is a very good indicator. It points to a recessionary outlook.                                          4) The oil price contract has a large gap that needs to be closed. Prices could fall to fill it.                        5) Job reports generally follow manufacturing and that outlook is poor. Layoffs will be coming.              6) There is a global reduction in home values as well as the US.                                                                  7) There are less dollars in circulation to which means less to lend = Credit crunch. Affects everything.  8) We see this in data from the US and Europe = less lending.                                                                    9) When you add just these aspects, it points to a stock market that will not blend with recessionary forces. When and if the Fed pivots, this change will create fear in the market.

Our team also notes that commercial real estate is a serious do-do. Commercial loans are much shorter in terms. At present, there is $1.7 trillion that needs financing. Now, with higher interest rates, many of these buildings will go bust. It is already happening. Brookfield, the largest office owner in downtown LA, just defaulted on two buildings. More will be coming. This also connects to banking who supplied these loans. Bottom line: The Federal Reserve creates inflation with cheap money and then destroys everything, especially the poor with their policy to correct their mistakes. We say, End the Fed!   Peace.