Wednesday, August 2, 2023

Where We Are in the Interest Rate Cycle

Click here to read the original Cautious Optimism Facebook post with comments

An update on economic soft-landings from the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff.

The Economics Correspondent apologizes for his extended absence as he’s been travelling and has found less time for writing than he anticipated.

One of the many things that makes CO a super-cool party dude who knows things and does stuff is the freedom he gives his columnists and CO Nation as a whole to share differing ideas and disagree without employing the iron fist of New York Times, Facebook, or pre-Elon Twitter censorship.

So regarding economic soft-landings and the rallying stock market, the Economics Correspondent is going to go out on a limb and take the risky proposition of questioning the near-term (12-24 months) staying power of both the +2.4% GDP economy and the stock market… using data from the St. Louis Federal Reserve’s own charts.

Cautious Rockers can draw their own conclusions looking back at a straightforward graph of nearly four decades of business cycles and the temporal relationship between Fed interest rake hike campaigns and recessions (in vertical grey areas). Then readers can judge for themselves at what point temporally the United States economy lies within that process today—at the extreme right of the chart—assuming history likes to repeat itself.

ps. The Economics Correspondent remembers in 1999, early 2000, 2006, and 2007 countless Wall Street strategists and economists (some working for the government) declaring:

“The interest rate hikes are over and there’s no recession in sight. The Fed has achieved a soft landing and it’s all clear skies from here!” 

He even remembers in late 2007 the Dow and S&P hitting record highs among calls that:

“The Fed is now LOWERING interest rates and there’s been no recession.”


“The bears and doom-and-gloomers have warned of recession for more than a year and it hasn’t happened. They’ve been proven wrong. With rates now going DOWN this is the best time to be an aggressive buyer of equities. Go all in!”

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