The Interest Rate Solution

https://www.marketwatch.com/story/for-a-record-446-days-this-recession-indicator-pointed-to-a-downturn-that-never-arrived-d907e018

Another highly-reliable recession indicator is the rise/increase in the 4-week moving average of the new unemployment claims. I started to watch this indicator closely over a year ago. There have been many false signals in that time; a brief increase, that subsequently reverses back downward. The 4-week moving average today is even lower than it was one year ago, by -9.88%. It has been consistently below 260,000 ever since November of ‘21.

For a record 446 days, this recession indicator pointed to a downturn that never arrived One of the bond market’s most reliable signals of an impending U.S. recession has remained inverted for 446 straight trading sessions — matching a record...

https://www.bloomberg.com/opinion/articles/2024-03-27/ai-could-have-a-surprising-effect-on-interest-rates?embedded-checkout=true&utm_source=www.theneurondaily.com&utm_medium=newsletter&utm_campaign=gpt-4-vs-data-analysts

AI Could Have a Surprising Effect on Interest Rates Artificial intelligence will improve productivity, which usually means lower rates. But it will also lead to greater demand for capital.

New inflation reading 'along the lines of what we want to see': Fed's Powell Federal Chair Jerome Powell said that a new inflation report released Friday is 'along the lines of what we want to see,' sticking to an assertion that inflation is still on a 'bumpy path' down to 2%.

If you’re not owning it, you’ll wish later that you did.

Bitcoin (BTC) Price Prediction 2024, 2025, 2030, 2040, 2050 If you're looking for Bitcoin price prediction for 2024, 2025, 2030, 2040, 2050, our long-term BTC price forecast can be useful for you.

https://www.reuters.com/markets/rates-bonds/fed-cut-us-rates-june-risks-skewed-towards-later-move-2024-02-20/

Fed to cut US rates in June, risks skewed towards later move: Reuters poll The U.S. Federal Reserve will cut the federal funds rate in June, according to a slim majority of economists polled by Reuters, who also said the greater risk was the first rate cut would come later than forecast rather than earlier.

The treasury yield curve is normally a reliable predictor of an upcoming recession. The curve has been predicting an oncoming recession for morr than a year. Either the curve missed this time, for unexpected and unexplained reasons, or, it’s still just a matter of when, and, not if.

Deutsche Bank no longer expects US recession in 2024 The brokerage said it now expects the economy to grow by 1.9% this year, compared with its prior forecast of 0.3% in a mild recession as the Fed tightened policy.

Stock market today: Stocks sink after Powell suggests Fed may not cut rates in March The Federal Reserve takes center stage while Wall Street evaluates any lingering impact from the first batch of tech earnings.

Regional banks aren't out of the woods yet - Marketplace Regional banks, which are feeling pressure from higher interest rates and commercial real estate, report quarterly results this week.

Reggie and Royal Perspectives Podcast briefly broke into the top 20 Korean business genre podcasts last week. It’s currently ranked at #68.

Pending Home Sales at Record Low Despite Falling Mortgage Rates Factoring in revisions, pending home sales remain at a record low level according to the National Association of Realtors (NAR).

Mortgage Interest Rates Today, December 28, 2023 | Rates Down 70 Points Since Last Month These are today's mortgage and refinance rates. As rates fall in the coming months, affordability should improve for buyers, though home prices remain high.

CASE SHILLER: HOME PRICES TURN UP THE THERMOSTAT

This Boxing Day data brings news from the housing sector, which has lately been battered about by the crosswinds of high mortgage rates and tight supply.

All this has put home prices on an uphill path.

U.S. home prices grew at an annual rate of 4.9% in October according to S&P Case-Shiller's 20-city composite (USSHPQ=ECI), hitting the consensus bull's eye.

It was the index's fastest year-over-year growth since November 2022.

Case Shiller: Home prices turn up the thermostat CASE SHILLER: HOME PRICES TURN UP THE THERMOSTATThis Boxing Day data brings news from the housing sector, which has lately been battered about by the crosswinds of high mortgage rates and tight supply.All this has put home prices on an uphill path.U.S. home prices grew at an annual rate of 4.9% in.....

Fed holds rates steady, indicates three cuts coming in 2024

Fed holds rates steady, indicates three cuts coming in 2024 The Federal Reserve on Wednesday held its key interest rate steady for the third straight time and set the table for multiple cuts to come in 2024 and beyond.

Goldman Says Inflation Entering Its 'Final Descent' And Interest Rates Will Settle —But They Won't Return To Near-Zero Goldman Sachs economists project interest rates to hit a new equilibrium as dreams fade of a dramatic Fed pivot.

Mortgage Rates Today: November 13, 2023—15-Year and 30-Year Mortgage Rates Move Up — Forbes Average mortgage rates increased for 30-year fixed and 30-year jumbo rates and trended higher for 15-year fixed rates.

Fed Holds Rates Steady, Issues Say Nothing Boilerplate Statement – MishTalk Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated.

GDP is at 4.9%. Home sales beating expectations. Jobless claims are not trending up, yet. Economic weakness is still a few more steps down the road, but, it's coming.

New Home Sales Jump 12.3 Percent Smash Expectations – MishTalk The divergence between new home sales and existing home sales widened further in September with a huge surge in new home sales.New Home Sales data from Commerce Department, chart by Mish

Mortgage rates just hit 8%—should you still buy a home?

Mortgage rates just hit 8%—should you still buy a home? With home prices expected to rise in 2024, buyers might want to bite the bullet on higher mortgage rates and buy a home now, experts say.

https://x.com/GameofTrades_/status/1712113488838136009?s=20

The Monthly Cost of Buying vs. Renting a House in America The U.S. has witnessed the biggest numerical gap in the monthly cost between buying a home and renting in over 50 years.

Despite Strong Jobs Report, Many Analysts Don’t See Another Rate Hike In 2023 Analysts from Morgan Stanley, Goldman Sachs, RBC, Wells Fargo and other firms said that while the addition of 336,000 jobs puts pressure on the Federal Reserve, the central bank is unlikely to raise rates again this year.

Deutsche Bank studied 34 past U.S. recessions to identify key warning signs and found that all 4 are flashing red right now Based on a study of the U.S. economy since 1854, Deutsche Bank created 'hit ratios' that show how often key macroeconomic triggers have caused recessions.

While the short-to-medium term picture is 'squishy', and, somewhat deceptive, the long-term picture is unmistakably compressed, muted, and, largely uncertain. Just as an adult grows more slowly, so does an advanced economy in a very general sense. Even some faster growth, emerging economies are showing their recent growth trends.

Of course, there will be surges and spurts in new and growing sectors. But, this is somewhat offset in the 50-100 year old industries which do not continue to grow, as children do. Think of technology versus autos, oil, or, rail transportation. https://www.theguardian.com/business/2023/aug/06/why-the-us-will-break-out-first-from-the-low-growth-trap

https://www.theguardian.com/business/2023/aug/06/why-the-us-will-break-out-first-from-the-low-growth-trap

Why the US will break out first from the low-growth trap | Larry Elliott Western economies must adopt industrial strategies, boost R&D and exploit new tech to prosper – Americans realise this better than Europeans

https://finance.yahoo.com/news/interest-rates-staying-higher-for-longer-means-at-least-through-2026-for-the-fed-100035115.html

Interest rates staying 'higher for longer' means at least through 2026 for the Fed The Fed kept rates steady on Wednesday but suggested a less friendly outlook for investors betting on the central bank starting to back off its efforts to bring inflation down.

The Fed Will Cut Rates in 2024
Jared Dillian

That’s a bold prediction in the title. I believe it will come true.

Given the uncooperative CPI reading we just got yesterday, it seems possible that the Fed will hike one more time before putting away the hiking boots. Or it might not. Either way, this rate hike campaign, notable for its speed and aggression, is close to being done.

With real rates positive and inflation down significantly from the highs, the Fed will recognize that it has done enough (for now) and will pause. For sure, there will be some language in the directive that says it will remain vigilant on inflation and is prepared to hike rates more if necessary, but the Fed pretty much has to put that in there. For all intents and purposes, though, it should be done.

Here comes the interesting part: In all the rate hike cycles going back to the great inflation of the 1970s, the Fed has never maintained rates at the peak for more than nine months. The Fed typically does not underreact to things on the upside or the downside. It does too much, and that is true today, too.

The banking system is under an enormous amount of stress, as the yield curve has been inverted for almost 15 months. Conventional wisdom dictates that we would have had a recession by now, but we still have so much money sloshing around from the pandemic stimulus that it hasn’t happened yet.

The economic models are not working, but the business cycle is alive and well. I assure you that contraction still follows expansion. We will get our recession.
Bond Sentiment

Here is what I find amazing…

Remember how excited people were about bonds when rates were under 1%?

You see how bearish people are about bonds today, with yields at 4.5%?

The bond market is no different than the stock market; everyone is bullish on the highs and bearish on the lows. I mean, you had trillions of negative-yielding bonds two years ago. How dumb is that?

These days, bonds are not such a terrible deal. You’re getting 2% positive real rates, which you haven’t had in over a decade. There are some muni bond closed-end funds out there that are yielding close to 8% with leverage. High-yield is close to 10%. Mortgages are 7%.

People talk about value investing in stocks, but there is such a thing as value investing in bonds, too. I run into some people online who are still bearish—kind of a doomsday trade, actually. If tens got to 6%, we would be screwed. But we’re screwed anyway.

What we’re starting to see is some ancillary economic indicators showing signs of stress. Credit card delinquencies are picking up. Auto delinquencies are picking up. Corporate defaults are picking up. All stuff you would expect to see after the bond market re-rates 500 basis points.

This feels a bit like 2006 to me, where some of this ancillary data was croaking, and people were just sleepwalking through it. If there is one lesson we learned from that period of history, it’s that it doesn’t matter until it matters. One day, nobody cared about the consumer, and the next day, they did. We walked into work on February 27, 2007, and the ABX was down 10 points, and that was the starting gun for the financial crisis. And stocks still had to go a bit higher. The stock market was the last to know.

Last week, I talked about my email Beige Book—the anecdotes I get from my subscribers. Anecdotes count for a lot—I am currently on a flight from LAX to JFK with a bunch of fancy people. The flight is full—doesn’t look like a recession to me. We’ll get there.
In the Short Term

If the Fed communicates in its usual Fed-speak way that it’s done hiking rates, we’re going to get a big move in stocks and bonds—higher. It all comes down to the communication. It must be credible. We’ll also get a big move higher in gold, which has been bonked by every single piece of hot economic data.

Remember, it doesn’t matter until it matters. Bearish and early is no fun. I didn’t exactly trade the financial crisis very well. I shorted homebuilders in 2005, about four months too early, and got squeezed out. I got squeezed out of stocks in the summer of 2007, though I had some hedges on.

Once the Big Short was underway, it was one of the easiest trades in the world—you knew all these banks and mortgage lenders were going to go to zero if you could withstand the volatility. Don’t get scared—nothing of that sort is going to happen this time. But it is not going to be fun.

Jared Dillian, MFA

Mortgage rate tipping point: Homeowners say 5% is the magic number to move

Mortgage rate tipping point: Homeowners say roughly 5% is the magic number to move At today's financing rates, it could cost more to move, even into a less expensive home. That creates an incentive for homeowners to stay put.

Too much focus on the relatively short-term impacts of inflation will lead to quite a rude awakening over the medium term. The transitory nature of the recent round of inflation was at first vigorously dismissed and denied. With a year-long flattening-to-downward trend, the discussions have diminished. The lack of a more rapid decline has maintained somewhat of a lingering complacency with that earlier trend.

A deflationary cycle would be long, brutal, and, would make the current inflationary trend disappear into the rear view mirror.

There is no lingering inflation with a falling money supply, or, more correctly, with a falling money velocity.

U.S. Money Supply Is Contracting for the First Time Since the Great Depression. Historically, This Is an Ominous Sign for Stocks. | The Motley Fool We're witnessing the first decline in M2 money supply of at least 2% since 1933.

https://www.cmegroup.com/openmarkets/economics/2023/US-Economy-Less-Interest-Rate-Sensitive.html?utm_source=twitter&utm_medium=paid_social&utm_campaign=useconomyinterestrates&utm_term=073123&utm_kxconfid=vnl4uf4pq

U.S. Economy Less Interest Rate Sensitive - OpenMarkets The U.S. economy does not respond to interest rates like it once did. Therefore, a rise in interest rates does not automatically mean a recession is around the corner. CME Group Chief Economist Blu Putnam explains.

Fed hikes rates by 0.25% to put further squeeze on inflation following June skip By Investing.com Fed hikes rates by 0.25% to put further squeeze on inflation following June skip