We saw the first quarter contraction for the US economy revised higher to 1.6% yesterday.
Japanese Industrial Production just out, collapsed, down 7.2% on the month.
The US has already seen manufacturing move into contraction territory too.
Which makes it all the more odd when US Federal Reserve Chairman Jerome Powell keeps saying the US economy is strong, and can withstand aggressive rate hikes. That it can afford and should be slowed from current levels. That his number one focus is to keep hiking rates aggressively until inflation is under control.
That could easily be a full year away, and would mean rates would be closer to 5% then! Far above previous expectations toward the 3.25% area. Well above anything the market is currently attempting to price.
We just had a first quarter US contraction in GDP. Manufacturing and services are slowing rapidly. Consumer sentiment is at GFC levels.
Yet, the Chairman of the Federal Reserve is speaking about a strong economy?
This is what we warned of last year, when I forecast the Fed would be too late and hike too aggressively. At that point, I did not know we would also have a serious war in Europe with the added burden of severe sanctions against one of the world’s largest energy providers.
This is going to be a continued runaway inflationary period with a mistaken Fed Chairman at the wheel. This is looking even worse than I first thought. Which was already to protect and sell your stock holdings all year long.
What the latest economic data and Fed Chair Powell comments are telling us is that the bottom for the stock market and indeed the US economy is still a long way down. Looking into those deep waters there may not be any bottom at all.
This could indeed be that 3-6 year severe slow down and stock correction scenario we have been concerned and warning of.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
