Is the U.S. economy currently in a recession? The National Bureau of Economic Research isn’t officially calling this a recession, but after two consecutive quarters of declining GDP, Berkshire Money Management Founder and CEO Allen Harris is convinced that what we’ve been experiencing in 2022 is, in fact, a recession. And as the Federal Reserve’s continued efforts to combat inflation begin to create “deep, deep pain,” the recession will only grow in 2023. TRANSCRIPT: Well there’s opinions, there’s facts, there’s data, and there’s anecdotes. So a fact, and I’m not going to get all wonky on this, promise,…
Insights & Advice
Tag: recession
Want to predict tomorrow’s stock market? Watch corporate insiders today.
It’s a fool’s errand to try and stick the landing and call the end of a bear market down to the exact day. Nonetheless, on February 7, 2022, this fool argued that there was a six-in-10 chance the stock market would bottom on May 22, 2022. I’m dying to find out if I’m right (or close to being right). If I am wrong, the stock market is in for a world of hurt. I assigned a two-in-10 chance that the stock market would drop 20% by September 2022. If the downdraft continues, in part, it will be because investors expect…
A dud of a stock market
“If stocks don’t fall, the Fed needs to force them.” —Bill Dudley, former NY Federal Reserve Bank President (2009–2018), on how far the Fed should go to get inflation under control, in his Bloomberg op-ed. Dudley may no longer be a member of the Fed, but I believe he is communicating a message from them. It is not that a stock market crash would deflate inflation. Dudley refers to a concept I introduced in a previous column describing the death of the “Fed put.” As I said in January 2022, and as Dudley noted on April 6, 2022, the Federal Reserve…
Can the Federal Reserve engineer a soft landing?
Can we talk about how crazy the first quarter of 2022 was? From Volodymyr Zelensky to Will Smith. The so-called “Don’t say gay” bill and the woefully mislabeled “Billionaires’ tax.” From the vetting of Ketanji Brown Jackson to the Olympics (well, maybe not the Olympics), the world was buzzing about serious news and outright nutso news. Perhaps that’s why many people didn’t realize that the S&P 500 fell more than 10% from a closing high during that quarter. Later, the index traded 10% higher than its intra-quarter closing low. But it did. Since World War II, there have only been…
Beware an inverted yield curve
An inverted yield curve is one of Wall Street’s most closely watched recession indicators, because it works. The inversion of the 2-year/10-year Treasuries has been a reliable predictor of recessions. Since 1976, there have been 10 such inversions that preceded four slowdowns and six recessions. It’s getting scary, people, because it is getting closer to an inversion. The yield curve is a graph that plots a line depicting the yield of bonds against their time to maturity. Typically, the longer the maturity, the higher the yield. But when a shorter maturity bond, like the 2-year note, yields more than a…
Markets are too frothy
Speculation is not quite rampant but it’s getting there. Volume is trailing off and the short covering that has boosted this market higher is fizzling. These are signs that beg for a nice sharp pull back that is overdue. As I have been suggesting (hoping) over the last two weeks, negotiators from Russia and Ukraine are making progress. Investors are beginning to hear more positive statements from both sides. A combination of factors are pressuring negotiators to cut a deal that would be acceptable to both heads of state. I expect that to happen soon. Remember that we are now…
A whiff of stagflation
The economy is slowing. Inflation is climbing. Investors are worried that these trends appear to be a recipe for the “S” word. The economic concept of stagflation where the witches’ brew of a faltering economy, aided and abetted by skyrocketing inflation, harkens back to the malaise of the late 1970s. At that time, interest rates rose to nearly 20%. Inflation, as measured by the Consumer Price Index (CPI), reached an annual average of 13.5% by 1980. Oil prices (like today) surpassed $100/barrel. Blame for this period of stagflation fell squarely on OPEC, a newly formed energy cartel of oil producers,…
Inflation is costing you an extra $276 a month
Inflation jumped 7.5 percent from last year, according to the Bureau of Labor Statistics’ Consumer Price Index. Moody’s Analytics compared that rate to inflation in 2018 and 2019, which was around 2.1 percent. They concluded that the excessive inflation costs the average U.S. household $276 per month, or $3,312 per year. And here (among other things) is the problem with that – it pushes the U.S. toward a recession. Now, if you’re a sane person, you should think that comment is crazy. I’m not yet calling for a recession. It is my job to look for these sort of things. In late…
I love the nightlife
“Please don’t talk about … all the trouble we’ve been through. Ah, please don’t talk about all of the plans we had for fixin’ this broken romance.” —Alicia Bridges Once upon a time, we enjoyed the conversation and company of others. Sometimes it feels as if we’ve gotten used to avoiding the public. For some, it now seems as if that’s their preference. After what feels like a lifetime of sheltering in place, perhaps we’re ready to mend that broken romance and find love again. Pole dancing classes are up 56 percent year-over-year, according to the Yelp Economic Average report for the third…