Morning Update

Good Morning Friends. If you want to know if or when we reach a recession forget the talking heads, since the National Bureau of Economic Research (NBR) are the real trackers of the data, and at this point because we’re still printing real final sales above 0 we have not truly started the mathematical decline into recession until Real Final Sales hits 0 and keep dropping below 0.

So, yes, we are facing high inflation, and ,yes, the economy is slowing down, but because we are actively trading it is imperative we do not confuse the Macro Economics of Deflation and Recession.  We are in a technical recession, based on things like Wikipedia, but the Fed doesn’t care about that; for actual recession to occur there must be a much more significant downturn month-over-month for the Fed to change direction.

Many of the problems that will lead us beyond a technical recession, but probably stop us before actual recession, is that the Fed will have attacked inflation and Fed Rates will be at or above 3%. THEN, as inflation is dropping and Rates are high, probably around Q1 of 2023, the Fed can say, “Look, infation is consistently dropping,”but economic hardship is continuing to plague Americans, so we’re going to stop QT and we’re going to drop rates.  will create a similar effect as stimulus without the Fed actually asking banks to create new securities, but by just refinancing the securities that are rolling off month-over-month.

We definitely need to be careful not to get sucked in to an early pivot bias, without the fed giving us that clear indication.

VIX is also getting low, last two times we hit low 20s we had the next leg down in the SPX and NDX.  So definitely something to keep an eye on is the VIX in the coming week.

Morning Update – July 10th, 2022

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