Recession

The Bears' Two Favorite Charts

May 8, 2023 2 min read paid

To support their pessimistic outlook, bearish prognosticators tend to focus on two charts. The first one shows the S&P 500 versus the securities held by the Fed, which account for most of the Fed’s balance sheet (chart). They contend that the bull market in stocks from 2009 through 2021 was driven by the Fed’s various quantitative easing programs. The S&P 500 peaked at a

Ed Yardeni

Hard to Have a Hard Landing When Employment Is Growing

May 7, 2023 2 min read paid

The S&P 500 rallied on Friday following yet another stronger-than-expected employment report. In his press conference on Wednesday, May 3, Fed Chair Jerome Powell observed: “It’s interesting [that] we’ve raised rates by 5 percentage points in 14 months, and the unemployment rate is 3½% pretty much where it was, even lower than where it was, when we started.” On Friday, we learned that the unemployment rate

Ed Yardeni

No Boom, No Bust

May 4, 2023 2 min read paid

Our Boom-Bust Barometer (BBB) fell into an unprecedented abyss during the pandemic lockdown in early 2020 (chart). Our BBB is the ratio of the CRB raw industrials spot price index to initial unemployment claims on a weekly basis. It is a very useful high-frequency business cycle indicator. Like the Index of Coincident Economic Indicators (CEI), it tends to peak at the tail end of booms and to bottom at the

Ed Yardeni

Powell's Plateau

May 3, 2023 2 min read

The current consensus in the financial markets seems to be that the FOMC is done hiking the federal funds rate (FFR) after having raised it today by 25bps to 5.00%-5.25%. Furthermore, markets seem to be anticipating that the FFR will be falling soon. That's consistent with the widely held view that a recession is coming soon. It isn't consistent with Fed Chair Jerome

Ed Yardeni

Stocks Buoyed By Solid Consumer Indicators

Apr 28, 2023 2 min read paid

The widely anticipated recession is still MIA. That's one reason why stocks have rebounded smartly since October 12, 2022, which was the end of the latest bear market in our opinion. It's hard to have a recession when consumer incomes are rising and they are spending more on both goods and services (chart). Inflation-adjusted incomes are rising because employment gains remain solid. Just as important is

Ed Yardeni

Inventories Depress GDP

Apr 27, 2023 1 min read

Economic growth wasn't as weak as suggested by real GDP which rose only 1.1% (saar) during Q1. During Q4, inventories surged as consumers pivoted from buying goods to purchasing services. Goods producers and providers stopped building unwanted inventories by cutting their orders to their suppliers and by lowering their prices to move their excess merchandise out the front door. So, excluding inventories, real final sales rose 3.

Ed Yardeni

Recession Drumbeat Getting Louder

Apr 20, 2023 3 min read

The S&P 500 has been holding up quite well as the the nattering nabobs of negativism beat their drums more loudly. Today's batch of economic indicators gave the bears plenty to growl about. Consider the following: (1) LEI. The Index of Leading Economic Indicators (LEI) peaked at a record high during February 2022 (chart). It's been falling since then. It was down during March

Ed Yardeni

The Fed Has Done Enough

Mar 21, 2023 2 min read

The banking crisis might be equivalent to a 100bps hike in the federal funds rate. We are just guessing, but financial conditions have surely tightened a lot as a result of the SVB earthquake and its aftershocks. Further hikes in the federal funds rate are no longer necessary to get it into restrictive territory as Fed officials have been aiming to do since they started the latest monetary policy tightening

Ed Yardeni

Capital Spending Getting A Lift From Washington

Feb 28, 2023 1 min read paid

Inflation-adjusted capital spending rose 4% y/y during Q4. That was a solid increase. However, it may be starting to slow. The CEO Outlook Index compiled by the Business Roundtable fell most of last year as the Fed's interest rate hikes heightened recession concerns (chart). Nondefense capital goods orders excluding aircraft have stalled at a record high in recent months through January (chart). The weakness in primary metals,

Ed Yardeni

The Economic Week Ahead, Feb. 27 - Mar. 3

Feb 26, 2023 1 min read

The economic indicators this week are likely to confirm that the economy is experiencing a rolling recession. Single-family housing is still in a recession. That's likely to be confirmed by January's pending existing home sales (Mon) and 2/24 mortgage applications (Wed). Manufacturing growth stalled last year through January. February's Dallas and Richmond Fed regional business surveys (Mon & Tue)--along with last week&

Ed Yardeni

Regional Puzzle Pieces Showing Slowing Economy & Inflation

Dec 28, 2022 2 min read

Almost everyone working on Wall Street is on vacation, except for the bears. They've been munching on stock prices, especially those of some of the MegaCaps like Tesla and Apple. There was a Santa Claus rally, sort of, when the S&P 500 climbed 14% from October 12 through November 30. But it has fizzled since then as investors fretted about further Fed tightening and a recession

Ed Yardeni

2023: Another Year of Living Dangerously?

Dec 26, 2022 2 min read

With the benefit of hindsight, the title of this QT certainly applied to 2022. It was a tough year for investors. The consensus view is that 2023 could be as tough: (1) A December NYT opinion piece by Peter Coy is titled, "A Strong Signal That Recession Is Looming." He focuses on the inverted yield curve, which often in the past accurately predicted a financial crisis that morphed

Ed Yardeni

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