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I think we're pretty close to saying stagflation was here.
Recessions typically follow when the yield curve uninverts and the Fed starts cutting.
I think we're pretty close to saying stagflation was here.
Recessions typically follow when the yield curve uninverts and the Fed starts cutting.
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well we certainly have something and it ISN'T a healthy robust economy
if it gets too embarrassing they will create a name for it
if it gets too embarrassing they will create a name for it
over9k
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U.S gdp just reported 2.8 vs 2.0 estimated. Unemployment close to estimates at 235k vs 238k.
GDP being high along with inflation being high but unemployment holding steady is very hawkish for rates. Growth plays have thus taken another tumble.
If anything, a hot economy and hot inflation at the same time would lend weight to interest rates still being too low. The only question is unemployment. I don't see them raising again but I can see the first rate cut getting pushed further and further out.
over9k
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The problem is that the magnificent 7 now account for half the index just on their own (last I checked anyway).
If you're worried about overexposure to them, there are equal-weighted etf's you can use (meaning that all 500 companies are kept at a consistent 0.2% of the index) that you'll find with a quick google search.
Airlines reported this week as well and most reported mediocre earnings and projected poor earnings going into the future because travellers have both run out of covid money and also can't afford (or justify) the now much higher cost(s) of travelling.
For those who don't know, airlines' biggest operating expense is actually just fuel. Add things like airline staff very reasonably demanding pay rises in line with inflation and you have a recipe for major operating expense increases.
If customers won't pay that, you have fewer people on fewer flights at lower margins. Which is exactly what they are predicting.
So yeah. So far, it's not just big tech getting slammed. Here's a link to bookmark to see who's reporting next: https://www.sectorspdrs.com/earningscalendar
over9k
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The AUD's taking a pretty serious tumble in response to all of this too which will only serve to increase australian inflation further. Down about 4% in a week and a half, which is huge.
Knobby22
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Probably needed to fall, I hate to say.
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not me i think the US is an exhausted economy , basically one big margin call away from collapse , so have focused on Asia( and India ) and Australia ( and China needs to take a breather and de-bottleneck )
however traders/fund managers/algos would rather trade today ( and this year ) rather than 5-10 years down the track
HOWEVER the big money sways the market ( and being a contrarian ) that still creates opportunities , in unpopular markets
now all this is fine until the market has a panic attack ( and liquidity disappears )
now the trick here is when you take the extra risks to get paid the extra rewards
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Eh GDP numbers tend to get over reported to the upside during early recession.
Job numbers have bee revised almost monthly so not much weight there...
over9k
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Curiously, I watched something a few days ago that said that business failures in the gfc period actually peaked in 2012, not 2009 too.
Obviously businesses don't just go bankrupt overnight, in a terrible economic environment they can hang on for a while, so this would make sense re: there being a time lag between a big economic drop and business failures.
Things like staff getting cut will obviously occur before the business goes bust and whatever staff remained end up in the unemployment lines too.
2025 would mark the "three years later" point like 2012 vs 2009 but I wonder if this is a typical lag period or just a coincidence.
Food for thought.
Takes a while for consumers to start spending after they get conditioned to save for bills and live thrifty.
90s recession took a long time to recover from. That was with a lot less bureaucratic red tape over everything. Australia has created an environment that's negative for innovation, or risk taking.
over9k
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Correct. Bull markets climb a wall of worry. Hence why markets (and spending) take the stairs up but the lift down.
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Last piece of the puzzle is unemployment IMO, and we're already seeing it rise in multiple economies including our own.
The post covid economic boom is not sustainable at these interest rates.
The post covid economic boom is not sustainable at these interest rates.
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Absolutely, personal debt is way too high, rent is too high something has to give.
over9k
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Debt and rent being so high has actually increased the participation rate.
Problem is, if there's no jobs for people to do, they're in a bit of a bind.
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That's the problem, as I said something has to give.
A mate who works as a garbo on the local council, said they just got a pay rise, they are on $40/hr.
That's got to go through the system, it doesn't matter whether you own or rent, the input costs are going up,
over9k
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Precisely. And that's before we even think about councils and state government debts.
Taxes (rates etc) are going to have to go up. There's no other option.
Exactly how does this get reset now?
We have had massive increases in wages and most people I know have had to limit employees.
There's not many big crews around in the building game anymore. Other industries seem to utilise permanent part time where people get a minimum of 15 hours work and that's it.
Public service made off like bandits though. They need a decent culling as well.
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With my limited economics education, but my fair share of common sense, the only way I can see this going is either a recession or a revaluation of the currency.
Which can bring about a recession anyway, because we are so dependent on imported goods, which would go up in cost and add to inflation.
The input costs for business in Australia must be huge on a global scale, so how do we attract investment, when power costs are through the roof, wages are through the roof and employee entitlements are through the roof (relative to competing countries).
Something has to give and keeping pump priming it as the Govt is doing, is only making the problem worse, in my humble opinion.
How it ends will be interesting, but I have a feeling it won't be pretty, I cleared out the bottom draw of the wish and a prayer shares, they will be the first to get hit if it implodes.
Only my personal thoughts and I have been wrong before, on numerous occasions .
Feels like Greece fell into a similar trap. Our resources will keep us afloat until they don't. Bit more thought by the government would be nice
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I guess it would be easier to say, what isn't behind the rise in inflation.
From the ABC website:
1h ago
By Lucia Stein
The Australian Bureau of Statistics, which is responsible for publishing the Consumer Price Indicator, found the biggest contributors to inflation were housing (+1.1%), food and non-alcoholic beverages (+1.2%), clothing and footwear (+3.1%), and alcohol and tobacco (+1.5%).
Housing was a key contributer, up 1.1% over the last year.
That was driven by growth in rents, up 2.0% and new dwellings purchased by owner-occupiers, up 1.1%
The ABS noted higher food and non-alcoholic beverage prices were fuelled by growth in fruit and vegetables, up 6.3% as well as dining out and take away food, which was up 0.6%. Meat and seafood were also up 1.3%.
Private health insurance premiums were also higher, which are typically reviewed in April each year.
From the ABC website:
What's behind rising prices?
1h ago
By Lucia Stein
The Australian Bureau of Statistics, which is responsible for publishing the Consumer Price Indicator, found the biggest contributors to inflation were housing (+1.1%), food and non-alcoholic beverages (+1.2%), clothing and footwear (+3.1%), and alcohol and tobacco (+1.5%).
Housing was a key contributer, up 1.1% over the last year.
That was driven by growth in rents, up 2.0% and new dwellings purchased by owner-occupiers, up 1.1%
Meanwhile, higher labour and material costs drove a 1.1% rise in construction of new dwellings.
The ABS noted higher food and non-alcoholic beverage prices were fuelled by growth in fruit and vegetables, up 6.3% as well as dining out and take away food, which was up 0.6%. Meat and seafood were also up 1.3%.
The ABS noted both goods and services annual inflation ticked up over the quarter.
Private health insurance premiums were also higher, which are typically reviewed in April each year.
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