You probably think I’m going to start with the Fed announcement regarding rate cuts. I am very stoked on that, as is the market. It was the best Fed Day across all asset classes in over a decade, in fact in almost 15 years. This is good news for interest rates. We are back in the 6’s, my friends!
I want to talk about something else Powell said yesterday though. I thought he might be under the influence of something when they announced rate cuts, because it was such a pivot. I became certain he was high when he said we are NOT in a recession. IN WHAT WORLD BRO?
Signs we are in a Recession:
The jobs market is not actually strong. Sure the November Nonfarm Payroll numbers rose and even the Household Survey rose…there are a couple glitches here. First is that revisions downwards following the big release of this data, are common practice. We are at negative 372,000 in revisions this year. So it really doesn’t matter what the numbers say initially, they’ll likely get revised down later. The Job Openings and Labor Turnover Survey showed hiring is at its lowest since March of 2021 and job listings from major recruiting firms continue to fall.
The most recent Beige Book, which is a report published by the Fed two weeks before each meeting, showed two-thirds of our nation’s economy is contracting or flatlining.
Rate cuts. I don’t know who noticed, before they popped the champagne bottles, that we aren’t at the Fed’s target of 2% inflation. So why would they announce rate cuts? Because they recognize we are headed into a not so soft landing, and they won’t want to make a recession into The Greater Recession or Great Recession 2.0 or the Great Self-Induced Recession.
The resilient consumer that has held our economy up is getting tapped out. They’ve spent their savings; we know this from savings rates. They’ve maxed their credit card, that data supports that too. Now the data is starting to show increased credit card delinquencies and more and more shoppers using the buy now, pay later option.
I do want to be more balanced and offer the point of view that I could be wrong, because…well, I’ve been wrong before. So…
Signs we are not in or headed into a Recession:
The definition of a recession is two consecutive quarters of a generally slowing economy. A depression happens when that is extended significantly longer. The Bureau of Economic Analysis estimates that the economy grew this year at an annual rate of 5.2%, at least as of the end of Q3.
Here’s what I will be sharing with my sphere in the coming weeks.
We are in layoff season.
Now is not the time to half ass your job. From small to medium to massive corporations and businesses, the higher ups are evaluating their profit and loss. You know what they do next? They look at that person who is late every day or the one who takes a 90-minute lunch and thinks no one notices. The ones who spend most of the time carefree and off task while the folks in the outer offices are stressed looking at the numbers. The ones who show up with a bad attitude. Don’t let this be you. Now IS the time to put your best foot forward every day to assert your value to the company.
Do not wait for interest rates to drop for your homeownership dreams to materialize. Every market brings its own challenges. Lower rates are something to be very excited about, they are also something you will need to strategize about. I highly recommend you have a short-term strategy that is adaptable on a dime’s notice and long-term strategy and goals that are pretty stagnant.
Take a cold, hard look at your money. The basic advice is to manage your spending and try to save. The more advanced advice I want to give you is HOARD YOUR CASH FOR INVESTMENT OPPORTUNITIES. Inside real estate, sure. Outside real estate, also for sure. These opportunities always pop up in times when very few can take advantage of them. I want my community to be the ones who are ready to pounce.