December Returns and Asset Performance
January 3, 2022
January Returns and Asset Performance
February 2, 2022The Real Fed Pivot - An Economic Slowdown
An economic slowdown is in process. For much of the past month, market news has been more focused on the Fed’s hawkish pivot. However, behind all the speculation on future interest rate hikes, the US economy has quietly hit a major air pocket.
For example, corporate earnings growth is moderating significantly. According to FactSet Research Systems, consolidated earnings for all companies in the S&P 500 index was 25.2% in the fourth quarter of 2021. The latest estimate for the first quarter of 2022 is 5.9%.
The latest shocker is from the Atlanta Fed. On February 27th, they the Atlanta Fed provided its last GDPNow forecast for the 4th quarter of 2021..a whopping 6.9%. Then on January 28th, they released the first GDPNow forecast for the first quarter of 2022….a mere 0.1%.
The history of GDP forecast from the Atlanta Fed is shown above. Whether its Omicron, 7% inflation, a near doubling in initial jobless claims, or because the vast majority of US consumers are once again tapped out, US GDP growth is rapidly collapsing and may turn negative as soon as this or next quarter.
Meanwhile, the Fed Forecast for an economic slowdown is significantly below the consensus forecast as shown below. FactSet Research systems is reporting a consensus projection of 2.7% US GDP growth, which aligns to the low end of the ‘blue-chip’ consensus shown in the plot:
What do you get when you combine 7% inflation with zero percent growth? Stagflation.
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