Dec

27

The market has always been a discursive struggle between the bulls and the bears. A system of oppositions that one might think, would logically or functionally negate each other. Of course, the relationship never stays linear for long and the inevitable convexity leads to a Hegelian resolution of thesis and antithesis.

The dialectical tension between an "impending" (but reluctant to manifest) recession (inverted yield curve) and a resilient economy (Q3 GDP +3.2) and labor market (unemployment 3.7%) underscores the struggle between the "higher for longer" bears, and the bulls who believe in the equivocation of "pause" with "pivot."

A reactive Fed will continue to focus on a strong jobs market and keep its tightening bias, which WILL inevitably cause a deep recession; however, the recession won't come "soon enough" for the Fed to save the day. And, the seemingly gradual descent into negative growth, will allow the recession trade to dominate its opposition.

Larry Williams responds:

The actual economy down but not out or negative:

Gary Phillips replies:

i get what you're saying. (perhaps the economy is strong enough we never have to endure a recession in 2023.)

but, methinks you're missing MY point: the longer the economy "holds on", and the longer it takes for a recession to rear its ugly head, the longer the Fed continues QT ( good news is very bad news). on the other hand, if there was an impulsive and deep, drop in growth, (bad news would be welcomed with open arms) the Fed would be more inclined to pause or pivot sooner (de facto put).

Read the full discussion here with additional contributors and charts.


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  1. marvin kelly on January 2, 2023 6:18 am

    There is much more at stake here than managing employment and inflation. If the US is to maintain the USD as a main reserve currency it will be forced to keep rates higher than usual for longer than usual. Given the amount of currency printed in 2020 if they just “let go” and eased up based on typical measures we will have a repeat of Wiemar Germany. I therefore conclude that the timing and resolution of the war situation in eastern Europe is a bigger factor than US employment. Given the influence of the warmonger coalition I predict “Higher for longer”.

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