Marcus Nunes posted a link to an interesting article on Bloomberg that features a survey of 31 economists about when they think the next recession will occur. According to the results of the survey, the most popular answer was 2018, which I believe to be optimistic considering the data I posted a couple weeks ago with my musings (or amusement) regarding Stanley Fischer’s spectacles, seeing more inflation in our future rather than less. Given the utter tone deafness of Fed officials with that data and with market forecasts, and the hefty reverse repo having come into full and intended force, I suspect that the wheels of recession are already greased. It won’t come from anywhere else.
So the big question of the week will be: Will they or won’t they signal to the planet that the tightening cycle shall begin despite having missed their nominal target for 28 consecutive quarters.
Given that the DOW tumbled from a high of ~18,000+ in August down to the close on Friday of ~16,300, and TIPS spreads sank along with it, it looks like the markets believe and have believed the Fed will indeed lay one on us this month. Of course that won’t be the beginning of the end, nor the beginning of clarity, because with lack of a credible nominal anchor, the drama over how much and how fast will ensue every month with plenty of volatility to go with it. Then, for lack of better spectacles at the Fed, we can likely count on too much too fast – even the first one is too much too fast – it’s in entirely the wrong direction.
And so, the bigger question is will Fed officials wise up sometime after having made this mistake and stop the madness before we end up back in the abyss.
Unfortunately, I don’t have answer to that question. But I don’t have a warm fuzzy that monetary policy is under control either.