Expectations rise that Fed will plunge economy into recession

Dip-buying again helped the markets to a small rally yesterday, but investors will once again have to face the reality of slowing economic activity and take losses. While expectations of a full point (100 basis point) rate hike have fallen below 10%, another 75 basis point rate hike is still seen as rapid progress in monetary tightening, especially as the Fed likely tries to avoid signs of weakening resolve in fighting inflation.

Most analysts and investment banks still believe the U.S. economy can avoid a recession, but recent corporate warnings (yesterday from Ford), falling home prices and housing starts, and much tighter monetary policy are raising expectations of a hard landing, which we already predicted late last year, contrary to all analyst opinions.

Yields on 10-year Treasury bonds rose above 3.55%, while yields on the more monetary-sensitive two-year bonds reached their highest level since 2007 and are hovering near 4%, further deepening the inversion of the yield curve – another clear sign that a U.S. recession is increasingly likely. 

In the last three months, more companies have revised their earnings expectations downward than upward, showing that companies are also positioning themselves increasingly pessimistically. 

In Germany, producer price inflation (August) rose to 45.8% y-o-y, the highest level on record, and a massive 7.9% increase from July – a worrying sign of how much consumers in Europe will still suffer from record gas and electricity prices. 

Markets in Europe continue to move toward new lows in 2022. Falling real estate prices are weighing on market sentiment. Equities, which are particularly sensitive to the economy, continue to record heavy losses.

Demand for the USD continues unabated ahead of the Fed's interest rate decision tomorrow. The strong USD and concerns about a slowing economy continue to weigh on commodity prices. Precious metals and cryptocurrencies will remain under massive pressure from tighter monetary policy and very high bond yields.


🇺🇸 US Markets ↕️/↘️ (bottom not reached yet!)
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↘️
Financial stocks ↘️
Energy ➡️

💱 Forex Markets
USD ➡️/↗️ 
CHF ➡️/↘️

⚒ Commodity Markets ➡️/↘️
Oil prices ➡️/↘️
Natural Gas prices ➡️
Metal prices ➡️/↘️
Precious Metals ➡️/↘️

⚡️Crypto Market ↘️

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 🇺🇸🏦🤜🏭💥