A Monster Reality Check Is Careening Toward Wall Street

Takeaway: Current Wall Street and Fed forecasts remain way off the mark.

A Monster Reality Check Is Careening Toward Wall Street - z cons

 

It’s not 2008... the first week of the year might actually be worse. So called, "blue chip" Wall Street year-end forecasts aren’t even close to the developing reality in financial markets. Take JPMorgan, for instance. Economists at the bank just said there's a "76% chance of recession by 2019."

 

By 2019? LOL

 

And then there’s the Fed. “We have to react to incoming events and we will react to them,” Fed Vice Chairman Stanley Fischer told CNBC yesterday.

 

Right… Let's take a closer look at that statement. What about the second straight month of sub-50 (aka contractionary) ISM manufacturing numbers? How about the latest Chicago PMI reading of 42.9? Or how about the existing industrial and earnings recession? 

 

Make no mistake, the Fed is tightening into a slowdown. Period. End of story.

 

Financial markets appear to be coming around to our view. The leading indicator for #GrowthSlowing is the 10-year Treasury (2.20%) minus 2yr (1.01%) and it’s making new lows this morning. In fact, today is a great day for long-term #GrowthSlowing and #LowerForLonger (rates) investors. Long bonds (TLT) are +1.1%.

 

While everyone on Old Wall is positioned for "rate hikes," rates are actually falling. 

 

 

A breath of fresh air (honesty) from former Dallas Fed head Richard Fisher on CNBC yesterday.

 

"We front-loaded this tremendous rally in stocks since March of 2009... It's going to take a little while [for the market] to digest this. So, I wasn't surprised about last year and I wouldn't be surprised if we had a rather fallow performance this year."

 

Let's be crystal clear about this. There is only one Wall Street firm that has been making the non-consensus US #Deflation and #Recession call. That would be us. Meanwhile, the Fed and Wall Street want you to believe that everything they missed in the past year is “transitory.”

 

Nope.

 

Oil, down another -1.3% this morning, has to be the darndest looking “transitory” thing I’ve seen in my macro life – it’s not transitory, it’s called #Deflation – and this will continue to perpetuate a credit cycle that is about to break out (credit spreads) to new cycle highs.

 

 

Getting back to equity markets, after it crashed from its all-time July #Bubble highs, the Old Wall is "downgrading" Apple (AAPL).

 

Thanks for coming out.

 

Lying to people about the economy for your own compensation purposes is fundamentally un-American.

 


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