February 2024 - Monthly Market Rollup
Recession still in the works. Inflation sideways but picking in the medium term. Fed flat for a few months unless commercial real estate breaks something somewhere.
Hello again to our Monthly Market Rollup for February 2024. We look to send out these chart heavy market summaries near the end of each month. Please be aware that these notes are not investing advice and should be enjoyed for as entertainment only. Always do your own research. Sources can be found below each graphic.
And for awareness, we divide these monthly notes up into a Recession watch, an Inflation section, and a Fed watch, along with a Conclusion section at the end, so let’s get going!
Recession Watch:
I know, I know, Nvidia beat earnings and everything is great for at least another three months. The Fed is not going to raise rates in March, and probably not in May either.
So what is the big deal? Isn’t everything going well?
Well let me show you some things:
First, unemployment is increasing in most areas if not overall.
Source: https://x.com/GameofTrades_/status/1762560734595309654
Permanent job losses are increasing:
Source: https://x.com/MFHoz/status/1759259251652841537
And total Job Openings are falling:
Source: https://x.com/GameofTrades_/status/1759563491588104252
Trucking employment looks like it is rolling over into a Recession:
Source: https://x.com/MFHoz/status/1757424081903681985
Credit delinquencies are on the rise.
Multifamily:
Source: https://twitter.com/FrancoisTrahan/status/1762539694623993968
Autos, Credit Cards, and Mortgages:
Source: https://twitter.com/JackFarley96/status/1754932507860996172
And speculative debt defaults are rising as well:
Source: https://x.com/GameofTrades_/status/1758857582360285674
Unsurprisingly with the increase of delinquencies and defaults, lending standards have started to track up overall, though may have rolled over in the short term:
Source: https://x.com/LizAnnSonders/status/1755209850814878162
Rig count is in decline:
Source: https://x.com/TaviCosta/status/1758235295634330022
And analysts have started cutting their estimates for the market:
Source: https://x.com/GameofTrades_/status/1759623881298747539
The Housing Market supply is increasing which doesn’t bode well for the broader economy.
Source: https://x.com/MFHoz/status/1759955762208456794
And buying conditions for the housing market are down, which usually comes either right before or with a Recession.
Source: https://twitter.com/GameofTrades_/status/1759257718601204205
Which tracks with declining net savings:
Source: https://x.com/GameofTrades_/status/1757868565120594275
So overall things look a little shaky in the Economy.
Inflation Watch:
And how is inflation looking? Well, it looks like it will pick back up in the coming months:
Source: https://twitter.com/AndreasSteno/status/1759250485671047227
Source: https://twitter.com/AndreasSteno/status/1758202587319332932
Source: https://twitter.com/MikaelSarwe/status/1757403270035771471
Source: https://twitter.com/PhilipJagd/status/1757524502777368639
https://x.com/AndreasSteno/status/1757445445800821217
https://x.com/AndreasSteno/status/1753147933577330946
So inflation looks like it will pick up despite the AI deflation story.
Federal Reserve Watch:
Ok, so the Economy looks a little shaky despite the market continuing upwards to sideways.
Inflation is subdued for the moment, but looks like it will come back in the coming months.
On this course Fed doesn’t need to cut rates yet.
But let’s first remember that soft landings after a rate hiking cycle are rare:
Source: https://x.com/GameofTrades_/status/1760344929979740392
So what the conclusion?
Conclusion:
Well, unless something breaks and causes an acute banking/credit crisis (Commercial Real Estate still looks suspicious as do the regional banks that hold much of the CRE paper), it looks like the Fed will hold rates flat in the near term. This as the recessionary numbers coming from various areas like trucking, unemployment, loan delinquencies, tightening lending standards have yet to bite too hard on the Economy, and while Inflation has yet to show back up to the party.
On the political front, given the coming US Presidential Election and using the lens of a political cynic, we could expect that the timing of the expected fiscal give-aways going into the Election to be all important for both the Market and Inflation.
Pull the ‘give-away’ lever too soon and the inflation kicks in before the Election. Do it too late and the sugar high won’t reach voters in sufficient dosages to move the needle.
But for the moment, the Fed finds itself in the calm before the storm. Which is just fine with them.
The Fed doesn’t want to be seen as political, and given that nothing is breaking yet, they look ready to stand pat on rates until either something breaks, or Inflation comes back in a bigger way.
More fun to come!
Until next month, be well.
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