Good Wednesday AM on this best day of the week,

The economic news released this morning was incredibly bond friendly and economically hostile. The truism about a recession/economic cycle is that ‘jobs are the last to go (housing is the first)’, and here they go! Also, the manufacturing and construction numbers are at levels typically only seen during recessionary periods. It is not pretty. Corporate earnings are beginning to fall, and companies are shifting their earnings outlook downward. This will bring the stock market down further and suck more wealth from bleeding households. Michael Burry (who was exceptionally successful during the great recession by shorting mortgage bonds and for whom the book “The Big Short” was largely written about) tweeted one word today: ‘Sell’.

None of this is good for the Fed because inflation is absolutely moderating, or has moderated, and the Fed is going to have a deflation problem before inflation metrics (which are backward looking), have flattened to the Fed target. Deflation will bring the Ten-Year Treasury Note back below 1%. I am not saying this is going to happen, but as the Fed made the comment about inflation being transitory a year and a half ago (which is of course accurate) while inflation continued to shoot up, the same will happen on the way down.

The economic effects of the 7 rate hikes in 2022 have not been fully felt yet. The Fed decision is in about an hour and the press conference is 30 minutes after that. I am sure Chairman Powell will put on his hawkish hat (excited for when he retires that thing) and try to walk back the slowing economy, however I am not sure the bond market will believe it. I do think stocks are vulnerable. Meanwhile, I think we have seen the bottom for bond PRICES (rates to improve).

Keep in mind that bottom is choppy and the road to recovery is not linear.

A few bullet points on what I am tracking...

Recessionary signs emerging:

• The labor market is tight, but there are clear signs it’s slowing down.
• Hints are popping up that end consumption is slowing.
• Business surveys are in the tank, which could be a precursor to a pullback.

Reheating:

• The housing market may already be stabilizing.
• Existing home sales fell 1.5% M-o-M in December, the 11th straight monthly decline, and declined to a seasonally adjusted annual rate of just 4.02 million. Y-o-Y sales fell 17.8% Y-o-Y to 5.03 million.
• Fortunately, the sales decline is likely over. December’s decline was small and reflected contracts signed in October and November when rates were 7%. With rates now lower, sales should perk up. December pending sales rose 2.5% M-o-M.

Very interesting stat, women once again are smarter than men.

• While U.S. women earn 83.1 cents for every dollar a man makes, according to the U.S. Bureau of Labor Statistics (BLS), single women own more homes than single men.
• A new LendingTree analysis of U.S. Census Bureau data finds that single women are more likely than single men to own a home in 48 of 50 states. The study reveals which states are most popular for single-women and single-men homeowners, as well as where the homeownership gap between the genders is the largest.
• Single women own about 2.64 million more homes than single men in the 50 states. Single women own about 10.76 million homes, while single men own about 8.12 million. Put another way, single women own an average of 12.90% of the owner-occupied homes in the 50 states, versus 10.06% among single men.

Please remain safe and stay healthy, make today great!