Recession Basics & FOMC Action
095: What to expect today in markets
Hey all, happy Wednesday.
Wanted to put out an easy to digest piece on recessions and the outcome of today’s FOMC meeting and Fed Chair Jerome Powell’s speech expected to take place around 2:30 p.m. ET.
Unless you’ve been living under a rock you’ve likely noticed the continued talk about whether or not we are in a recession. While I won’t strive to say if we are definitively yet or not, it certainly seems like we could be in for some serious pain if Jerome Powell comes out of the gates hot with a 100bps hike and some strong rhetoric emphasizing the fed’s commitment to driving down inflation.
Tech, TMT, and blue chip crypto names have bled extensively to start this week and are now in a holding pattern awaiting a verdict in FOMC.
A quick pulse check on institutions, analysts, and leading economists indicates to us that sentiment is pretty bad at the moment.
A SmartAsset survey of nearly 300 financial advisors taken in early August found that 80% believe the U.S. either is already in a recession or will enter one during the next 12 months.
While I’d love to firmly say I think folks are overly bearish at this point, I’m weary to make that call given we are starting to see several historical signs of inflation, including an inverted yield curve (more on that later).
We’ll cover the following this morning:
Overview of current market
Basic indicators of a recession
Recession Proof Assets (historically)
Our FOMC scenarios (For equities and crypto)
On top of the FOMC speech today on the macro side, President Vladimir Putin of Russia gave a speech this morning calling for a partial mobilization of roughly 300K reservists.
In addition this week, Russian Parliament on Tuesday passed a law that introduced the concepts of “mobilization” and a type of “martial law” into Russia’s criminal code — further fueling speculation that Putin could move to officially declare war and a implement a potential nationwide draft (New York Times).
According to discord sources found by Yahoo Finance - Google searches for the phrase "How to leave Russia" reached a peak on 20 September in Russia in anticipation for the speech. Military age men are desperately trying to find ways to avoid what they likely view as a pointless war.
People desperately scrambled for flights out of the country on Wednesday morning. This comes on the heels of growing anti war sentiment and social unrest due to a brutal stalemate in Ukraine.
Analysts agree the mobilization efforts are not a good sign for things to come in the region and could potentially lead to escalation of the conflict on Ukraine.
This is the the first mobilization in Russia since World War II and is a deeply unpopular move at home.
In what appeared to be a veiled threat in the nearly 7 minute speech Putin said he would use all means necessary to defend Russian territory.
Personally?
I think the risk of NATO involvement and nuclear escalation just jumped significantly.
But back to the highly anticipated FOMC meeting.
The goal here is to give you a good idea of what is going to happen with markets later today when the Fed decides on it’s next rate hike, how to make some money off what is going to happen, and how to save money/hedge for any further fuckery and sell offs.
We’re at a pretty critical juncture in markets and our goal is to help everyone have the best understanding of what’s going on with no frills to preserve capital and make it out to the other side.
Though it might be a bit late to cover some of these topics, we will highlight some of the best assets to hedge against a full blown recession as well as the scenarios we think are likely after JPOW drops a bomb on us.