Tuesday, June 14, 2022

Is the Real Economy as Weak as Markets?


Guest Post by Liam Cosgrove

“This market has a 1929 like feeling….”

With the S&P 500 closing in a bear market for the first time since March 2020 on Monday, investors are beginning to panic. The old adage “Don’t fight the Fed” seems to hold true in a tightening cycle as well. Those memes of Jerome Powell spitting money out of a printing press seem like ancient history now.

Tech is getting particularly slaughtered with Bitcoin down 65% from its highs, Cathie Woods’ Ark Innovation fund giving back all of its post-pandemic gains, and yet another decentralized finance platform appears to have blown up. As Lawrence Lepard, investment manager at Equity Management Associates LLC, said, “ This market has a 1929 like feeling…”

Perhaps more ominous, the pain is beginning to reach beyond financial markets. No matter which rock you look under, you won’t like what you find.

Adam Taggart, founder of investing media channel Wealthion, sounds off on the seemingly endless brigade of bearish economic data:

  • Wages, while rising in nominal terms, have been on a steady decline in real terms since Q2 of 2020.

  • Consumer credit has recently hit a new record-high in April while, that same month, the personal savings rate has reached lows not seen since the heart of the 2008 recession.

  • Unemployment and housing, two sectors which had been maintaining a veneer of stability, are showing signs of weakness with layoffs being announced at basically every major tech name you can think of and a recent spike in home listings suggesting a lack of buyers and frantic sellers.

  • The yield curve has inverted… again.

He goes over much more than can be fit into one article.

If you’ve been asleep at the wheel, you may be thinking we are doing alright, especially with reassurances from Biden’s Press Secretary that the economy is “better than it has been historically.” I urge you, take ten minutes to fill yourself in on what’s really going on behind the curtain: