The damage has been done and the economy Is still hitting for recession so we Have a very ominous warning from a big Bank telling us that the Federal Reserve Has done too much damage and there's no Stopping the crash so the latest CPI Report is out and inflation has Apparently collapsed down to five Percent in March the lowest in nearly Two years and this tells us that the Rate hike cycle might be about to come To an end the Federal Reserve they are Signaling one more interest rate Increase and that might be it guys and Remember that traditionally you need to Bring inflation down you need to raise Rates above inflation and we've been Saying this for many times that interest Rates have to go above inflation so Slightly power is going to fulfill the Prophecy and Jack rates up one or two More times to get it above the CPI but The damage has already been done and the Economy is finally feeling the effect of Higher interest rates and I want us to Understand why CPI inflation truly came Down the BLS has redefined how they Calculate inflation and instead of Basing it on two years of data they are Just using the last 12 months and this Is the disturbing part if you just use The higher inflation figure in March 2022 which is at 8.5 instead of the one In March 2021 of course the CPI print is
Going to come out lower but why did they Redefine inflation is because they need That excuse to stop the rate highs Because of the damage it is causing to The economy the banks are really Collapsing at 4.5 rates so just imagine If rates hit six or seven percent if we Use the true inflation figures and this Could collapse everything but according To Bank of America there's no escaping Of recession telling us that investors Are too optimistic on rate cards and not Pessimistic enough on recession and they Have given us 12 charts that show the Economy is still going to burn down more Signals are starting to flash rate and We're going to go through the most Important ones so even if the Federal Reserve starts to high creates a Recession could be unavoidable it is big Into the cake and the first flashing Signal is the yield curve and what we Are seeing is a stiffening of the yield Curve or what I call the re-inverting of The curve and I think by now we know That inverted yield curve is a powerful Sign of a recession that's coming and The inversion happens when a short-term Bond yields are higher than the long Term yield and a three-month treasury Today is yielding almost five percent While the 10 year is at 3.4 percent and That doesn't make sense in a normal Economy it happens when the Federal
Reserve is manipulating the short end of The curve with their rate hikes but the Market is fighting back and pricing in An economic slowdown so they buy into The long end of the curve they don't Believe the Federal Reserve however the Reverse is happening now the yield curve Is reverting back to normal and According to Bank of America this is Really bad news it is not a signal that We are in the clear and we can see how Every time the yield curve steepens a Recession is soon to follow it does mean That the recovery is coming but we still Need to go through a recession the Spread between the two-year and the 10-year yield has deepened from minus 110 to minus 50 basis points then every Time a stiffening happens a recession is Just around the corner it is the canary In a coal mine and many Traders they Share this view when the yield curve Uninverts it is signaling that the Recession is closer the uninversion says That trouble is coming within a year and The bond market is already pricing in The end of the tightening cycle they Expect cars to happen sooner or later so Why is this recession happening is Because the Federal Reserve they have Over tightened too quickly we have gone Through the fastest tightening cycle in Modern history the economy they have Endured nine rate hikes within 12 months
Taking us from zero percent to 4.75 That's why we saw the backing crisis at The svb collapse money suddenly became Expensive and the economy is slowing Down and one strong indicator of a Recession is the demand for oil which is Reflected in a lower oil price and According to the Bank oil prices Historically rise into recessions and Decline during recessions and latest OPEC plus output costs underscore Recession concerns with limited upward Pricing pressures from China reopening So far and if we look at the chart we Can see the recent spike in oil during The Ukraine conflict and the subsequent Drop in price especially over the past Few months and this is after all the Sanctions and price gaps on Russian oil That drove up Global prices for the West The price is still collapsing and that's Why OPEC plus decided to cut their Production yes one reason why the Saudis Made the cut was to defy the United States it was most definitely a middle Finger to the Biden Administration but a Bigger reason is to protect their Revenues especially when the recession Is coming soon and back in 2022 they Already told the world that they will Defend their oil income when they slash Their production by 2 million barrels a Day it was because the risk of a global Recession is growing fast and right now
There's a big bet that China's recovery Will save the global economy right Wall Street believes that the Chinese will Revive all demand and Export deflation To the world with all their cheap Goods But I have bad news China's Manufacturing activity is taking longer Than usual to recover with the chai Shin PMI which is the Blue Line falling back To the neutral level of 50. yes I agree Wall Street's assessment that China is In the early stages of recovery but by The time the Chinese economy recovers And Manufacturing picks up we might Already be in a recession and that's why OPEC plus had to cut its oil production They want to increase their revenue from The rest of the world besides China they Know that China is really getting lots Of oil from Putin from Russia at Big Discounts so there isn't much point in Relying on additional Chinese demand you Might as well squeeze the rest of the World especially the West for more money But the biggest fear that everyone has Including the Federal Reserve is a Credit Crisis coming and this is the True horror story what's popping up the Economy is credit money borrowed into Existence and when the Music Stops Everything could start crashing down now Bank of America has been tracking the Credit Crunch and it is getting worse U.S banks have been tightening Landing
Standards to small companies for the Past few quarters credit crunch to Intensify and highly correlated with Small business demand for workers and we Can see a trend of how the jobless Claims rise when the availability of Loans to small businesses dropped and We're at a point where the amount of Loans is starting to drop and a jobless Claims haven't caught up just yet and This means a wave of unemployment is Going to sweep across the United States Very soon it's not just a bank calling For credit crunch the Federal Reserve Fears that a crunch might already be Here overall Bank credit has stalled at About 17.5 trillion dollars since January and its year on year growth has Been falling fast the banks are Tightening their Landing standards Across all categories there's a Tremendous fly up in loan capital Degrees all over the place from small Business lending to commercial real Estate and even auto loans is across the Board guys banks are afraid that people Can't pay back what they borrowed Especially when a recession is coming we Have Bank credit growth slowing down Tremendously to only five percent and he Doesn't have to go to the negative to Trigger a recession we are in such a Bloated economy that is run by credit That if the velocity of loan slows down
Enough the economy might be in big Trouble and this decline in credit is Affecting home buyers with mortgage Demand crashing to the 28-year low and This is bad because real estate prices Are starting to come down all over the World not just in the United States Global home prices are falling and the Trend is turning negative we have the UK Australia and New Zealand already in the Rate U.S and Canadian home prices are Also falling fast and this increases the Odds of a recession because people Suddenly feel poorer and this is called The wealth effect of more accurately the Reverse wealth effect when the average Joe sees his home equity take a hit Maybe it's down 5 10 or even 20 percent He suddenly feels poor up and this is Going to spill over to his spending Habits he isn't going to spend or Consume as much as before so the man on The street is tightening as well central Banks around the world they are Monitoring the reverse wealth effect Because they know everything is Interlinked if home prices crash this Will just fit more into recession and we Can see The Dominoes slowly stacking up And there are already many signs that The recession is on the way the banks Are tightening people are already Starting to spend less and this is very Bad news for equities now Bank of
America has very bold claims that the Stock market is still going to crash They are telling the world that there's Plenty of room for more downside in the S P 500 and I think it's obvious to most Of us that a recession clears the debt They cause stock prices to crash and the Drawdowns can be brutal now 2008 saw a Crazy crash of 57 percent and the 1970s Crash was anywhere between 35 to 48 Percent that's a lot but what's really Interesting is they are positioning to Sell the last hike and according to the Bank selling the final rate height was The right strategy for stocks in the Inflationary 70s and 80s and they noted Down all the final rate Heights in History and separated them in two Categories now one for inflationary Period like today and another when there Was this inflation where inflation was Slowly trending down and we can see that Over the next three to six months post Hike the stock market continued to drop By four to six percent during the Inflationary period and this means we Could be seeing more downside to go for The next six months after Paul does his Final hike and when is the recession Coming I believe this is when a lot of Consensus are beginning to converge with The Federal Reserve expecting a banking Crisis come later in the year some time In Q3 or Q4 Bank of America is also
Forecasting of recession starting in Q3 This year our base projection is for Research to occur in the U.S economy Beginning in the third quarter of 2023 Occurred through the fourth quarter of 2023 and into the first quarter of 2024 So we have to hang tight and prepare for A recession later on in the year I don't Believe they can try to redefine the Recession the second time now they try To explain the way two quarters of Negative GDP back in 2022 I think we all Remembered that and the excuse high Employment figures but if the job losses Continue they can't trick the world Again when the economy crashes and this Brings us to the big danger ahead for Stocks right now Wall Street is still in Delusion land they are still Ultra Bullish on stocks even though rates have Flown up they've gone from zero percent To four point seven five percent and They are still slapping High earnings Multiples on the stock prices and if you Look at the PE ratio for the S P 500 we Can see it is still a disturbingly high Levels coming in at 29. this means stock Prices are 29 times that of their Earnings with the mean only at 17. and This should be very disturbing stocks Today are priced higher than in 2008 Before the crash Wall Street is now Afraid of the upcoming earnings season Because you can explain the way high
Employment rates you can try to redefine Inflation but you can't quiz the Earnings numbers you have earnings Coming in led by the Big Wall Street Banks like JP Morgan and Wells Fargo and The market already expects earnings to Fall by 10 for the big Banks and if this Number is met or if it is worse than That then there'll be a big sell-off Across the board so we aren't out of the Woods yet a lot of signs are still Pointing towards a recession 68 believe The Federal Reserve will still hike Rates by another 25 basis points in May And the rate card isn't even been Considered until we reach the month of July there are a lot of things they can Take down the market and even if the FED Cuts rates tomorrow it might already be Too late so let me know what you think In the comments below is the recession Coming or are we in a new bull market Once the Federal Reserve starts to cut Rates let me know in the comments below Stay safe be sure to smash the like Button and subscribe as we navigate Through these crazy times
