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So far recession has been narrative only. All current economic indicators have been quite strong... employment, GDP, retail sales, wage growth. Nominal GDP is

So far recession has been narrative only. All current economic indicators have been quite strong... employment, GDP, retail sales, wage growth. Nominal GDP is running close to 10%, which is massive relative to recent history. There has been a pervasive media narrative that recession is imminent though. Many leading indicators are looking poor... survey metrics, shipping costs, growth rates have slowed (while still being strong). I consider these more "soft" datapoints though. A lot is a normalization of covid era excesses. It's pretty clear from history that Fed tightening cycles end in recession the vast majority of times, but my bet is that long end rates (10y) will have to spike again to at or above 4% before we trigger an actual recession. The market has frontrun it far too early which became self-defeating

mindcrime 4y ago
A lot is a normalization of covid era excesses. Yeah, everything that went on during the "peak COVID era" has definitely flipped a lot of things around, and confused the issue in many areas. I expect that's one reason it's so hard right now to be sure what's really happening. The other thing that strikes me about this is that the fed has been looking for a good chance to start raising rates for a LONG time now. Interest rates have been running really low by historical standards for a long time IIRC, to the point that there was talk about the possibility of negative interest rates possibly being needed in response to some future economic downturn. They wanted rates up a bit to have "dry powder" to expend in response to the next (actual) recession. The risk, obviously, is the possibility of triggering a recession through that very act of trying to get rates back up to a "normal" level.
kjkjadksj 4y ago
All the indicators except the mortgage to income ratio that has grown seemingly exponentially the last few months. A housing bubble alone is capable of setting off a recession certainly, and we are in a huge one.
- adam_arthur 4y ago
  And it will eventually. But that's far down the line... prices are still well above the covid era bubble run. And the easing of financial conditions over the past few months has buoyed the previously declining housing metrics. Markets front ran the recession far too early, which led to the recession not happening. Now Fed likely has to hike even more than they would have otherwise
epistemer 4y ago
Q4 earnings have been quite impressive too. I do imagine we underestimate the boomers here, the amount of wealth they sit on and the completely inelastic consumer spending they represent along with giving them an 8.7% raise in 2023. The people I know that get social security already have more money than they can ever spend in investments alone. They don't even spend their pensions let alone touch the SS check.

mindcrime 4y ago

A lot is a normalization of covid era excesses. Yeah, everything that went on during the "peak COVID era" has definitely flipped a lot of things around, and confused the issue in many areas. I expect that's one reason it's so hard right now to be sure what's really happening. The other thing that strikes me about this is that the fed has been looking for a good chance to start raising rates for a LONG time now. Interest rates have been running really low by historical standards for a long time IIRC, to the point that there was talk about the possibility of negative interest rates possibly being needed in response to some future economic downturn. They wanted rates up a bit to have "dry powder" to expend in response to the next (actual) recession. The risk, obviously, is the possibility of triggering a recession through that very act of trying to get rates back up to a "normal" level.

kjkjadksj 4y ago

All the indicators except the mortgage to income ratio that has grown seemingly exponentially the last few months. A housing bubble alone is capable of setting off a recession certainly, and we are in a huge one.

adam_arthur 4y ago
And it will eventually. But that's far down the line... prices are still well above the covid era bubble run. And the easing of financial conditions over the past few months has buoyed the previously declining housing metrics. Markets front ran the recession far too early, which led to the recession not happening. Now Fed likely has to hike even more than they would have otherwise

epistemer 4y ago

Q4 earnings have been quite impressive too. I do imagine we underestimate the boomers here, the amount of wealth they sit on and the completely inelastic consumer spending they represent along with giving them an 8.7% raise in 2023. The people I know that get social security already have more money than they can ever spend in investments alone. They don't even spend their pensions let alone touch the SS check.