REPLAY | Monthly | GDP Conference Call | Where’s the Recession? Slowdown Sure, But Entrenched High Inflation – 10/27/22

Posted October 27, 2022 by rvillareal

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Where’s the Recession? Slowdown Sure
But Entrenched High Inflation

• Q3 U.S. Economy (1^st Report)—Ain’t Any Recession Here-and-Now
  • Real GDP Q3 Summary—Strong?  Slowdown?  Mixed?  Recession?
  • What’s Strong, What’s Weak?
  • Motion is “Boomy Expansion” to “Slowdown or Transition” or “Recession?”
  • Recession Indicators Monitor
• Inflation—Has it Peaked?  Is Diminishing Noticeable?  Where, How Much, How Long?
  • Classic Demand-Pull—with S-Side Shocks
    the Pandemic and Russia-Ukraine War
  • Demand-Pull—the Pentup Demands, Super-Stimulative Monetary and Fiscal Policies Reactions, and Internal Inflation Dynamics
  • “Inflation Genie Out-of-the-Bottle”—Inflationary Process Ongoing Entrenched High—Stages-of-Processing Sequence and Time Lags
  • “Phillips Curve”—Maybe Back to an Extent
  • Underlying Inflation Dynamics
• DE Baseline—“Soft Landing” (Odds 55%); “Recession” (Odds 30%); “Growth Recession” (Odds 10%); Something Else (Odds, 5%)
  • DE Baseline Parameters—Growth, Inflation, Unemployment, Earnings
  • Slowdown and Slow Growth Most Likely—Transition From Boomy Expansion to Weaker Can Appear Recession-Like
  • Big Housing and Residential Construction Downturn (3.4% of Real GDP)
  • Aggregate Consumption Growth the Engine (About 70% to 71% of Real GDP)
• Fed Policy— Mission Still 2% Inflation—Believe What Chair Powell Says—No Pivot
  • DE Monetary Policy Forecast—Federal Funds Rate—75; 50; 25 Each Qtr 2023; and QT
  • Interest Rate Forecasts—Rising Rates, on Average, Fed Funds 5-1/3% by Second Half 2023; Upside Open-Ended
  • Note Positive Real Rates Fed Comments
• Financial Markets—Equity Market
  • Equity Market Earnings—Still Growing but Much Slower
  • Earnings Still Supportive to Equities at Current Levels
  • Fair Value and Fair Value Ranges—S&P 500 3300 to 4000; P/E Near-to-Intermediate in Range 14-to-17
• Summary—Neutral Equities; Bearish Fixed Income; Bullish U.S. Dollar