Well, it was a trip of a lifetime.
I appreciate your understanding – I really enjoyed the vacation with my family. I know there’s always a lot to cover, but it’s important to be able to take a break from these markets.
As I noted, I’d planned this trip right after the banking crisis in March. As fate would have it, this was something I did back in 2008 as well. I took that entire summer off and traveled to southwestern Florida… right before Bear Stearns collapsed. At the time, I didn’t know what to expect for the financial markets; I’d thought that the whole system was coming apart.
Five months later, I gave myself the all-clear. I moved to Chicago and took a job in commodity research. Just three days after I arrived… Lehman Brothers collapsed.
If I’d known that would happen, I might have stayed on that Florida beach.
It’s a good reminder to always be cautious, and I have, from that day to this. Let’s take a look at what I’m watching now…
The Market Outlook Is as Hazy as East Coast Weather
This morning, I’m sitting in New York City. My eyes are burning. The air is heavy. Wildfires in Canada are creating incredible plumes of smoke that are pouring across the East Coast. I’ll be traveling to Baltimore today, and the air quality is reportedly no better there.
Is this a metaphor for the financial markets? Smoke… but no visible fire on the horizon?
My general view is that there will be a period of calm in these markets – much like we saw back in May, 2008. But there are still gray and black swans lurking throughout the global economy.
This morning, Wednesday, we saw yet another cut in the global economic growth forecasts from the World Bank. The forecast now calls for economic growth in the second half of the year into 2024 to slow to 2.4% from a previous forecast of 2.7%.
This is what happens when nations spend more money yet provide zero pathway to sustainable economic growth. The world has printed around $150 trillion in debt in the last 20 years and produced just $42 trillion in growth to show for it. My general expectation is they will continue to feed the debt beast; they’re unlikely to learn from their mistakes.
Later today, we’ll look at the ongoing disconnect between the financial markets and the underlying economy. I don’t foresee a rate increase next week (which would be the 11th straight hike for the year). Instead, I’m looking for the Treasury Department to pull some capital out of the banking system as it aims to raise its Treasury General Account to $500 billion by the end of the month. That will have an impact that runs like a rate hike. From there, I foresee the central bank revisiting its rate cycle in July.
June 07 2023