9/20 Recap

As we all await the decision today from Powell & Co it is important to remember the bond market has been warning us of a recession for some time. I feel like we’ve been in one for some time, but we obviously changed the definition along the way. We have the 2/10 inversion, we have negative manufacturing growth, negative consumer sentiment and you have to remember the bulk of our GDP is based on the consumer. Something like 60-70%. So if the consumer is struggling and now we have student loan repayments, higher fuel prices, and higher inputs on everything, the average person is not doing well. Still, the bulk of consumption does come from the top 10% and they are doing ok, so the divergence is growing between the haves and the have nots.

Today’s consensus is a pause, the reality is these inflation numbers are silly, they always want to mention ex fuel or ex this or that, it is laughable, inflation is bad, the rate of change may be slowing, but it is bad. Our fed has 2 mandates, they can’t fight a recession and maintain high rates. It just isn’t possible. Look at March the minute we had a banking crisis, in 2 weeks the FED had turned up their assets to crisis levels.

The SPY remains in no man’s land but we should have a better idea of direction this afternoon. A baby step would be getting over that cluster of moving averages first. Interestingly the VIX is showing no fear into this event as it remains below 14.

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