Be careful what you wish for, as the looming rate cut anticipated at the Fed’s March 20th meeting might not bring the desired outcome. History suggests that the first cut often aligns with a market decline, typically indicative of a slowing economy or crisis.
Concerns are surfacing, especially in California, where tax receipts have plummeted by 25%, raising questions about an impending recession. The Legislative Analyst’s Office (LAO) report indicates a downturn in 2022, supported by the triggering of the Sahm Rule, even though applying it to states sparks controversy.
Economic downturn signals are widespread, exemplified by Spotify’s plan to cut 17% of its staff. The company cites dramatically slowed economic growth and increased capital costs as driving factors, possibly foreshadowing broader economic challenges.
Delinquencies, adjusted for inflation, have reached 2008 levels. Unlike the 2008 crisis, current delinquencies persist despite no decline in interest rates or home prices. This sets the stage for a potentially larger policy error in market history.
November’s robust market rally, reminiscent of 2008, doesn’t necessarily indicate a bullish trend. The S&P 500’s expected 3.1% year-over-year revenue growth for Q4 2023 falls below the earlier estimate of 3.9% growth, raising concerns about the market’s health.
The acceleration of ejections from TGA+RRP hints at a desperate attempt to keep the dollar down. However, its effectiveness is debatable. The downward curve in this scenario doesn’t paint a picture of a soft landing, raising apprehensions about the economic trajectory. As the Fed contemplates a rate cut, the market watches with bated breath, navigating uncertain waters filled with signs of an impending economic slowdown.
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Be careful what you wish for!
The Fed's first cut is being priced in for the March 20th meeting with a probability of 63.4%.
If history serves as any guide, that first cut often leads into a market decline (because the Fed is generally cutting into a slowing economy or crisis). pic.twitter.com/AsLmsvn4Pb
— Markets & Mayhem (@Mayhem4Markets) December 3, 2023
"Is California heading into a recession?"
Likely yes.
According to a report released on Friday by the Legislative Analyst's Office (LAO) in CA, the state entered a downturn in 2022.
They reference the Sahm Rule being triggered (there's controversy in applying to states). pic.twitter.com/u1Dl3a0cqk
— Neely (@NeelyTamminga) December 4, 2023
🚨🚨🚨
Delinquencies (adjusted for inflation) have now reached the same level as 2008.
Except, the difference is that back then interest rates and home prices had ALREADY peaked and were coming down. Whereas now, neither is coming down yet.
More importantly, we see that… pic.twitter.com/m2e0K7QzWa
— Wall Street Silver (@WallStreetSilv) December 4, 2023
Spotify plans to cut 17% of its staff. “Economic growth has slowed dramatically and capital has become more expensive. Spotify is not an exception to these realities." This may be a hint of what's to come or a convenient excuse for firms looking to trim. t.co/RXtwQJLPum
— Lisa Abramowicz (@lisaabramowicz1) December 4, 2023
November saw the largest easing in US financial conditions of any single month in the past forty years!
PC: GS pic.twitter.com/ty0AcfhMhA
— Ayesha Tariq, CFA (@AyeshaTariq) December 3, 2023
U.S. financial markets experienced the strongest everything rally during November since 2008. Anything interesting happen in 2008? pic.twitter.com/veeAwi08uW
— Barchart (@Barchart) December 4, 2023
Bears dead
"The 4-week change in AAII Bear Index is one of the largest drops we have seen in the last 20yrs." pic.twitter.com/ncLjaFkhrW
— zerohedge (@zerohedge) December 4, 2023
$SPX is expected to report Y/Y revenue growth of 3.1% for Q4 2023, which is below the estimate of 3.9% revenue growth on September 30. #earnings, #earningsinsight, t.co/9kuaVvAWAh pic.twitter.com/woauRr9aP8
— FactSet (@FactSet) December 2, 2023
TGA+RRP has an interesting relationship to $DXY
The acceleration of the ejections from TGA+RRP could be interpreted as a desperation attempt to keep the dollar down, but it doesn't appear to be working all that well.
This should be a clear signal that supports the theory of… pic.twitter.com/ZoWRUcLIy4
— Darkly Energized (@ka1n0s) December 4, 2023