ISMS 3: Will the US Have a Recession or a Soft Landing?

Never has the US gov’t caused such a massive move in GDP. The question is, “which way is GDP going?” Will we see a recession or a soft landing?Click here to get the PDF with all charts and graphsReasons for a recessionExtreme increases in interest rates are meant to slow down the economyThe fastest rate-hike cycle by the Fed since the 1980sIn the 2004 cycle, the target rate was hiked by 4.25% in totalSame as in the current cycle, but it has now been done much fasterThe massive rise in mortgage rates is dramatically slowing the property marketThis, in turn, leads to crashing prices, which will make people feel less wealthy and hold them back from spendingThe yield curve has inverted, which has perfectly predicted prior recessionsAll recessions in the US since 1968 were preceded by an inverted yield curveThe average time from inversion until the recession started was about 1 year (about mid-2023)The surge in spending supported by gov’t handouts is working itself out of the systemSince 2Q21, households have demonstrated stronger than usual spending behaviorStrong wage growth has contributed to more savings in 4Q21 onwardReasons for a soft landingHigh employment means the economy is robust and can withstand the rate hikesCompanies are highly profitable, which will allow them to bear a slowdown more easilyCompanies are sitting on tons of cashIndividuals slowed their spending in anticipation of an economic slowdownDemocrat party leadership will pump things up (e.g., strategic petroleum reserve)US banks are in a strong position, holding lots of cash and gov’t bondsReducing the risk of a financial sector crisis that would exacerbate an economic crisisAt the end of 2021, the banks had nearly 40% of their assets in cash and securitiesCompared to 13% at the end of 2007Gov’t spending is going to be crowded out by borrowing interest paymentsAnd then politicians will pressure the Fed to cut ratesClick here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast