Fed Was Wrong on Inflation, Now Wrong on Recession

Inflation is yesterday’s news. 

What’s crashing the market now is slowing growth. 

While it won’t be “officially” declared for months — the same way inflation was deemed “transitory” until it was undeniable — we are currently in a recession. 

Growth at the country and corporate level continues to deteriorate. 

First quarter GDP was revised down this week to negative 1.6%. The second quarter will be similarly shitty (a technical term).

All while Priestly Powell stands at the podium and tells the sheep that the economy is strong. Remember what he said in June: 

“Overall, spending is very strong, the consumer’s in really good shape financially — they’re spending. There’s no sign of a broader slowdown that I can see in the economy.” 

Maybe he’s getting high like the millions of other Americans who need to alter their minds to deal with the current realities. 

Inflation is America's new reality as recession sets in.

Because outside of Fictional Fedland, things are going from bad to worse, quickly. 

  • The number of subprime auto loan write-offs and borrowers more than 60 days past due on their payments has risen to a new record
  • The University of Michigan consumer sentiment index is at a record low
  • Retail sails “unexpectedly” declined in May and were revised down for April
  • Small business owners outlook is at an all-time low (WSJ poll)
  • Americans’ savings rate is the lowest since 2008

And we haven’t even gotten to Q2 corporate earnings and GDP.

I’ve been telling you the comparisons would not be kind. The slowing growth of this year is being compared to the stimulated numbers of 2021. 

Corporately, you’ll see earnings growth continue to contract. At the country level, expect Q2 GDP growth to be nonexistent: the Fed’s own GDPNow is modeling near zero. 

Oh, and the stock market just closed out its worst first half in over a half century. 

But your appointed — not even elected! — Fedheads continue their hawkish posturing unabated by reality. 

If it’s bad for the S&P, it’s worse for speculations. The S&P is down 21% for the year while the TSXV is down 34%. 

On the whole, cash and gold remain the places to be. 

See what I’m doing to stay defensive while broad markets remain in crash mode.

Nick Hodge

Nick Hodge
Publisher, Daily Profit Cycle