Stocks won’t be satisfied until the Fed submits them
You don’t have to look far to see that the economy is going to hell.
The problem is that investors are like my daughter, wanting two contradictory things at the same time. For my daughter, it’s both “leave me alone” and “can you take me to my friend’s house?” For Wall Street, it’s: “Please, Jay Powell, raise rates to control runaway inflation” and “Stop! Higher rates will plunge the economy into a recession.
The harsh medicine that the Fed is giving to the US economy is in effect killing the patient and triggering a recession. But, as Powell said on Wednesday, “We have to restore price stability. We really do. It’s the foundation of the economy. If you don’t have price stability, the economy won’t work.” not… Wages will be swallowed up.”
So what now?
At this point, economists fear it may be too late to save the economy from a recession. And, as Allison noted yesterday, her boy Jay admitted for the first time on Wednesday that much of the inflationary pressure the Fed is trying to counter is beyond its power to repair. Skyrocketing oil prices caused in part by a war in Ukraine, Covid, a screwed up supply chain… Powell can’t change those things. (If only!)
The good news, (ok, it’s not this fine, but we take what we can get), is it a recession could solve some of these problems. If the economy slows, it should undermine demand and bring prices down with it. If people stop buying things and traveling, they won’t need as much fuel and prices should go down.
Wall Street does not predict a massive recession like the Covid lockdown-induced economic calamity two years ago or the 2008 financial crisis. The job market held up and many people still saved a reasonable amount of money thanks to those sweet, sugary checks they received a year ago.
“Our projected recession would be one of the mildest post-war recessions,” Wells Fargo economist Jay Bryson said in a note to investors. Bryson said a looming recession, which he said is a certainty, would be far less severe than the two most recent recessions, which were “killer business.”
“Because many of the underlying fundamentals of the economy are generally sound at present (i.e. household and corporate balance sheets are generally in good shape and the banking system is well capitalized), we believe a mild and relatively short downturn is more likely than a deep and prolonged one,” he wrote.
NUMBER OF THE DAY: 3 million dollars
GOOD DAY BONUS
Hey, Amazon, meet me on camera 3…
Oh hi, how are you, Amazon? I know you work hard. How is it for you to pee in a bottle?
So the prices are going up and we all want discounts right now. But, this year, can you just work to bring the prices down on things that we actually have need?
Every year I get excited about Prime Day. And every year I see a bunch of TVs (I have one), echoes (I once hit mine with a hammer) and other crap that I would never buy or have no need for a 20% discount (20 cents on cotton balls — cool!).
How about a different strategy this year: make Whole Foods prices look like planet Earth costs. Or just toilet paper, cardboard boxes and canned beans at a discount for the recession.