After the post-election sentiment surge into December, the market has done little. The equal weight SP500 is back to where it was in October. Sentiment may start souring soon.
Inflation is climbing again and this takes away the lower interest rate narrative. They say it is transitory, but the last time they said that we went over 10% inflation.
The housing market is stalled and prices are starting to decline in some areas. If the investor owners start dumping, watch out. Mortgage rates had no business going under 5% (created the bubble) and now should stay over 6%. They may go over 8% before this is over.
We’ve been in one of the longest strong labor markets in our history. Inflation got away from the Fed… or they let it, but some aspects of inflation will not go away. These include reshoring and now higher labor cost. Tariffs and deportations add to the inflationary fuel, but its the money printing guys at the Fed who failed us.
There is still too much liquidity sloshing around going into stupid imagery coins and meme stocks. The Fed is trying to reduce the liquidity but it is going too slow.
I’ve said for 2 years I do not see a recession in the data while others have called it as being just around the corner. I see mild indications now, but not enough alone to call a recession. But I am going to call a recession for 2025. Why? Policy induced recession. Too much uncertainty. Global trade chaos. But mostly austerity.
Cutting spending deeply is austerity. For every $1 trillion they cut, the economy will slow $3-4 trillion. It’s called the multiplier effect.
Even with all the liquidity, the market is sniffing this out. Retail is the exit money for the smart investors. Strong money chasing out weak – gold is the only strong money anymore. It should break $3000 an oz soon. It was well under $2000 a year ago.
It’s all a harbinger of what is to come. And it is coming faster everyday.
Invest safe,
Michael Bond