Economic Warning Signs: Collapsing Yield Curve, Plummeting Oil, and Soaring Bank REPO Interventions Raise Alarms Despite Perceived Boom

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As ominous indicators mount, a disconnect persists as many believe the economy is thriving. The collapsing yield curve, paralleled by the decline in oil prices, is underscored by emergency bank REPO interventions. Despite these red flags, some remain oblivious to the economic downturn.

Hedge funds’ consistent sale of US equities for the third consecutive week aligns with fading inflation expectations for the S&P 500, signaling potential challenges in earnings and sales estimates. A discernible shift to a risk-off mood is evident, further accentuated by extreme semiconductor inventory levels, poised for potential destocking, which could exert downward pressure on demand and lead to weaker pricing and margins in the sector.

Adding to concerns, the Federal Reserve is predicted to cut interest rates six times in 2024, recognizing clear signs of an economic slowdown according to ING Economics. The alarming dip in US job openings to a two-year low, reminiscent of March 2021 levels, contributes to the narrative of a faltering economy.

As the stock buyback blackout window commences on December 11th, indicating a pause in a significant source of market support, the strain on small businesses becomes pronounced. With short-term loan rates for small businesses reaching a staggering 10%, the current economic trajectory appears increasingly unsustainable, prompting a closer examination of the challenges ahead.

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The Federal Reserve will cut interest rates 6 times in 2024 as the economy shows clear signs of cooling down (per ING Economics)