Let’s Talk… Are We in a Recession?

Despite what the Biden administration says, a recession is defined as two consecutive quarters of negative GDP growth. The 1st quarter of this year was negative, so we are waiting for the data on the 2nd quarter. Here are my thoughts. 

First, I think we are already in a recession. It’s a Fed / Russian-Ukrainian invasion induced recession. I just think the combination of higher gas prices and uncertainty made businesses/ consumers pull back and that’s going to show in the 2nd quarter GDP numbers. 

Second, it is my belief that the inflation numbers will start looking better. If you look at retailers like Target / Walmart, they are about to embark on heavy discounting because inventories have built to levels that are too high. Another example is gas prices have consistently fallen for the past month. 

Third, it’s possible that the Fed raised rates to slow the economy in order to prevent it from overheating. If this is the case, look for them to moderate the pace at which they raise rates. 

Lastly, the economy can grow even when the Fed doesn’t have zero % interest rates. If you look at the past cycles, the economy and stock market can grow even during interest rate hiking cycles. 

In conclusion, what if the Fed got it right and this leads to a longer expansion? They slowed the car (economy)  down a little, so it wouldn’t overheat in order for it to run for a longer time.

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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

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