recession watch: 2024
There are a couple different leading indicators of a recession, and these are not yet blinking red, although GDP growth has slowed so far in 2022, and consumers are grumpy about high inflation.
One indicator is when overnight interest rates are higher than long-term interest rates. This indicator is not currently present.
Another indicator is when the bank prime rate, multiplied by the amount of total outstanding debt, is so high that 25% of GDP must be spent on interest payments. This indicator is not currently present.
But futures markets predict that next spring overnight interest rates will be higher than long-term interest rates, and the bank prime rate will also be high enough --> so next spring the recession triggers will be pulled.
Then, it takes about 12-18 months for the recession to arrive, so sometime in the middle of 2024.
The stock, bond, and crypto markets are panicking, but there's no sign of an imminent recession in which mass layoffs occur. Instead, we've probably passed the peak for corporate profits during this cycle. Profits often peak a couple years before a recession arrives.
I think the most likely timing for a recession is summer/fall 2024, just in time for the presidential election campaign, throwing a dagger into the back of the Democratic candidate. I expect there will be at least one billionaire independent/3rd-party candidate, and maybe a primary challenger to Biden, but the Republican will ultimately win. The only question in my mind is whether somebody can knock off Trump in the Republican primary. If he runs he will face strong opposition. Somebody is going to say on a debate stage, "Look, I'm not running because I thought the last election was stolen. I'm running because the next election is about bringing reason, faith, and prosperity back to America." I could write the speeches myself.
So, I expect the stock market to remain in tumble mode for another two years plus or minus three months (21-27 months), until the Fed sees a spike in unemployment and starts to cut interest rates again. But timing these things is tough!
One indicator is when overnight interest rates are higher than long-term interest rates. This indicator is not currently present.
Another indicator is when the bank prime rate, multiplied by the amount of total outstanding debt, is so high that 25% of GDP must be spent on interest payments. This indicator is not currently present.
But futures markets predict that next spring overnight interest rates will be higher than long-term interest rates, and the bank prime rate will also be high enough --> so next spring the recession triggers will be pulled.
Then, it takes about 12-18 months for the recession to arrive, so sometime in the middle of 2024.
The stock, bond, and crypto markets are panicking, but there's no sign of an imminent recession in which mass layoffs occur. Instead, we've probably passed the peak for corporate profits during this cycle. Profits often peak a couple years before a recession arrives.
I think the most likely timing for a recession is summer/fall 2024, just in time for the presidential election campaign, throwing a dagger into the back of the Democratic candidate. I expect there will be at least one billionaire independent/3rd-party candidate, and maybe a primary challenger to Biden, but the Republican will ultimately win. The only question in my mind is whether somebody can knock off Trump in the Republican primary. If he runs he will face strong opposition. Somebody is going to say on a debate stage, "Look, I'm not running because I thought the last election was stolen. I'm running because the next election is about bringing reason, faith, and prosperity back to America." I could write the speeches myself.
So, I expect the stock market to remain in tumble mode for another two years plus or minus three months (21-27 months), until the Fed sees a spike in unemployment and starts to cut interest rates again. But timing these things is tough!