CEOs are rapidly losing confidence in their businesses. The stock market may already be looking through current inflation and seeing lower rates ahead. And economists, famous predictors of 11 of the last 6 recessions, are increasingly predicting another one.
Del: Oh, he's drunk. How would he know where we're going?
— Planes, Trains and Automobiles
Friday Misdirection Charts
Can we officially start worrying about a recession now? We’ve only just gotten started on rate hikes, but it already feels as though the Fed may be going in the wrong direction.
CEOs are rapidly losing confidence in their businesses. The stock market may already be looking through current inflation and seeing lower rates ahead. And economists, famous predictors of 11 of the last 6 recessions, are increasingly predicting another one.
The Fed remains committed to getting rates up in the hopes of getting inflation down. Are they driving us straight into oncoming traffic? Let’s have a look at some charts to find out.
CEOs have gotten the memo:
US corporations had a surprisingly great first half, but CEOs are taking their cue from the Fed, which has told them to knock it off. They probably will.
Investors have gotten the memo, too:
Are things as bad as 2000 or 2008? An unscientific search of my memory says “no,” but the Fed has convinced investors otherwise.
People will say anything in a survey, though, so here’s some hard data:
Rolex prices are falling. Nothing says excess liquidity like paying $16,000 for a $9,000 watch. Lower Rolex prices suggests there is less cash sloshing around.
Airbnb bookings are going in the other direction:
More spending on travel and less on Rolexes should help rebalance supply chains, which is great news for the Fed.
House buyers have gotten the memo, as well:
Mortgage applications are falling as higher prices and interest rates make housing increasingly unaffordable.
The money printer is slowing:
Surging tax receipts (and lower spending) has taken the federal deficit from a peak of $4.1 trillion in March '21 down to $1.2 trillion in April '22.
Is the worst behind us then?
The consensus expects inflation to decelerate to 3% by next year — which would be close enough to the official 2% target for the Fed to declare victory.
People may not be positioned for disinflation:
Sentiment can only get better from here.
If so, there is money to be put to work:
Asset managers have the most cash to spend since 2001.
Let’s hope they change direction and start spending it soon.
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