ISMS 3: Will the US Have a Recession or a Soft Landing?

Extreme increases in interest rates are meant to slow down the economy

The fastest rate-hike cycle by the Fed since the 1980s

In the 2004 cycle, the target rate was hiked by 4.25% in total

Same as in the current cycle, but it has now been done much faster

The massive rise in mortgage rates is dramatically slowing the property market

This, in turn, leads to crashing prices, which will make people feel less wealthy and hold them back from spending

The yield curve has inverted, which has perfectly predicted prior recessions

All recessions in the US since 1968 were preceded by an inverted yield curve

The average time from inversion until the recession started was about 1 year (about mid-2023)

The surge in spending supported by gov’t handouts is working itself out of the system

Since 2Q21, households have demonstrated stronger than usual spending behavior

Strong wage growth has contributed to more savings in 4Q21 onward

Reasons for a recession