US Treasury Secretary Yellen Says Signs of US Recession Aren’t in Sight for Now (As Yield Curve And Atlanta Fed GDPNow Tracker SCREAM Recession)

Just remember, the US economy had strong employment figures just prior to the 2008 Great Recession and financial crisis, so US Treasury Secretary Yellen, Biden’s economic cheerleader Bernstein and Obama’s economic cheerleader Sperling are all relying on a bad indicator of economic health to justify that the US economy is in great shape.

(Bloomberg) — Treasury Secretary Janet Yellen expressed confidence in the Federal Reserve’s fight against inflation and said she doesn’t see any sign that the US economy is in a broad recession.

“We’re likely to see some slowing of job creation,” Yellen said on NBC’s “Meet the Press” on Sunday. “I don’t think that that’s a recession. A recession is broad-based weakness in the economy. We’re not seeing that now.”

With US consumer prices rising at the fastest rate in four decades, a growing number of analysts say it will take a recession and higher joblessness to ease price pressures significantly. The Federal Reserve raised rates in June by the most since 1994 and is expected to approve another 75 basis-point hike this week.

Inflation is “way too high,” Yellen said, while renewing the Biden administration’s argument that it’s also high in many other advanced economies.

“The Fed is charged with putting in place policies that will bring inflation down,” said Yellen, a former Fed chair. “And I expect them to be successful.”

Dammit, Janet. All of Biden’s anti-fossil fuel orders are still in place and Biden/Pelosi/Schumer are still trying to pass the highly-inflationary Build Back (Inflation) Better bill. And The Fed still has not shrunk it massive balance sheet yet.

But Janet, the US Treasury 10Y-2Y yield curve remains inverted (historically ahead of a recession) while the Atlanta Fed GDPNow Q2 tracker is at -1.6% which would make the second quarter in a row of negative real GDP growth in a row (historically a definition of recession).

My preferred 10Y-2Y chart shows the yield curve more inverted than even prior to The Great Recession!

But in Yellen’s defense, The Fed’s preferred yield curve (implied yield on 3-month T-Bills in 18 month – 3 month T-Bill yield) is still positive, though crashing like a paralyzed falcon.

So, the Biden administration is sticking to the strong labor market story. But what the Biden Administration (and Yellen) fail to acknowledge is 1) unemployment is a lagged indicator of a recession (unemployment was low prior to the 2008 GREAT recession, then exploded and 2) there is still a tremendous amount of monetary stimulus outstanding that The Fed has taken away … yet.

Essentially, the Biden Administration is panicking over the coming mid-year election and will say anything at this point to stay in power. So, I would probably ignore anything said by Biden, Yellen and their talking heads before the midterms elections. But when Biden’s economic advisor says that the US economy is strong, I want to ask him how having NEGATIVE wage growth is a good thing,

Let’s see if Yellen is correct and The Fed’s Fireball will tame inflation. Frankly, I think the global slowdown is the only thing that will tame inflation.

Grizzly Bear! US Existing Home Sales Crash -14.24% YoY In June As Fed Strangles Housing Market (Median Price 13.27% YoY As Inventory Still MIA)

Instead of The Boston Strangler, we now have the DC Strangler. Better known as The Federal Reserve and their war on inflation.

US existing home sales crashed -14.24% YoY and -5.40% MoM in June as The Fed tightens its icy grip on the housing market. Existing home sales were lower than expected at 5.12 million home sold SAAR.

Median price for existing home sales declined to 13.27% YoY as inventory available for sale remains MIA. And The Fed’s balance sheet is still out in force.

The US housing market in terms of sales has entered a bear market, but with The Fed’s balance sheet stimulus still hunting asset prices, it is a grizzly bear market in terms of affordability.

Heartaches By The Number! Mortgage Applications Declined For Third week In A Row, Lowest Level Since 2000 (Applications DOWN -71% Under Biden, Mortgage Rates UP 99%)

Heartaches by the number!

Mortgage applications declined for the third week in a row, reaching the lowest level since 2000.

Mortgage applications decreased 6.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 15, 2022.

The Refinance Index decreased 4 percent from the previous week and was 80 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index increased 16 percent compared with the previous week and was 19 percent lower than the same week one year ago.

Heartache #1: Mortgage rates have risen 99% under Biden.

Heartache #2: Mortgage application have fallen -71% under Biden.

As The Federal Reserve continues to fight inflation caused by 1) excessive stimulus by The Federal Reserve and Federal government surrounding Covid and 2) Biden’s energy policies, we are seeing the mortgage market as collateral damage.

Doom Loop? The US Dollar Is Booming, But Will A Doom Loop Follow? (US Treasury Yield Curve Inverted At -20 BPS)

Here we go doom loop de loop?

The dollar’s gain is the world’s pain — and based on its current trajectory, the world may be in for a whole lot more discomfort.

Concerns over global growth have recently sent the US Dollar Index to the strongest level on record, with the greenback hitting multi-decade highs against currencies like the euro and the yen.

But the move risks becoming a self-reinforcing feedback loop given that the vast majority of cross-border trade is still denominated in dollars, and a stronger US currency has historically translated into a broad hit to the world economy.

Against the backdrop of higher-than-expected inflation and still-elevated commodities prices, the concern is that we’re in for a dollar ‘doom loop’ like never before, according to Jon Turek, the founder of JST Advisors and author of the Cheap Convexity blog.

With the Federal Reserve hiking interest rates at the fastest pace in decades, he says, it’s much less clear what could break the feedback loop in the next few months.

The Dollar Doom Loop with US inflation causing The Fed to tighten

Under Biden’s policies, inflation hit a 40-year high (blue line), and the US Dollar (green line) is strengthening. Then we have The Fed raising the target rate (purple line) and the probability of recession rising with Fed tightening.

Is a US recession coming? The US Treasury 10Y-2Y yield curve is inverted at almost -20 basis points.

There is a Fed open market committee meeting in one week and they are expected to raise their target rate by 75 basis points according to Fed Fund Futures data. Inflation keeps rising as does the probability of a US recession. So, The Fed will keep on tightening.

Simply Unaffordable? Or Is The Fed Killing-off Housing In Its Quest To Crush Inflation? (REAL Home Price Growth Is 12% YoY While REAL Wage Growth Is -3.95% YoY)

Housing in the US is simply unaffordable for the middle class and low-wage workers. Combine rising food costs and gasoline/heating costs, and we have an economic disaster on our hands.

US existing home sales for June will be released on Wednesday. But can The Fed kill-off home price inflation?

A preliminary analysis of existing home sales for June is for a seasonally adjusted annual rate of 5.1 million, down 5.4% from May and down 14.2% from last June. As The Fed cranks up its target rate (green line) and eventually shrinking its balance sheet, we will see further shrinking of existing home sales this summer.

But home price inflation remains high (Case-Shiller National home price index at 21.23% YoY, Zillow’s rent index at 14.75% YoY) while the Consumer Price Index YoY is at 40-year high of 9.1% YoY. In other words, home price inflation is 233% of the stated inflation rate from Uncle Sam.

May’s existing home sales report was … sobering. There is still historically low levels of available inventory and median sales price of existing home sales was 14.64% YoY. Of course, the alternative to ownership is renting which is growing at 14.75% YoY. Simply unaffordable.

The gap between REAL home price growth (12.13% YoY) and REAL average hourly earnings (-3.95% YoY).

Consumer sentiment for housing is near the lowest level since 1982.

The Fed seems determined to remove the punch bowl in its efforts to crush inflation. But will The Fed’s efforts also crush the housing and mortgage market?

Bottle Of Wine? Strong US Dollar And Soaring Inflation Is A Brutal Cocktail For S&P 500 Firms (Will The Fed Pivot To QE Again?)

The US Dollar keeps strengthening as inflation skyrockets. Good news?

Bear in mind that a strong dollar is a two-edged sword. The US Dollar Index has risen 16% year-over-year, presenting a big hurdle for US firms with business overseas.

That strength of the greenback will rise until the Fed makes a dovish policy pivot.

And that pivot is forecast to occur at the Feb ’23 FOMC meeting.

But will The Fed pivot?

The Biden Cocktail. A fine wine turned to vinegar.

The Shallows! Traders Fully Price 75-Basis-Point Fed Hike at July Meeting As Mortgage Rates Decline Slightly (Fed Fighting Inflation At All Costs!)

Here we go loop de loop! Traders are pricing in a 75 basis point rate increase at the July FOMC meeting despite collapsing Fed 5-year inflation breakeven rates.

Money markets are betting on a three quarter-percentage point hike by Federal Reserve officials later this month, wagering the US will need to ramp up the pace of monetary tightening to tame inflation.

The repricing comes ahead of a key inflation report due Wednesday. The headline figure for June is set to accelerate to 8.8% year over year, the highest since 1981.

Bankrate’s 30Y mortgage rate fell slightly ahead of today’s inflation report with the expectation of The Fed hiking their target rate by 75 basis points to 2.338% at the July 27th Fed Open Market Committee meeting.

Trader expectations from Fed Funds Futures data:

Last night I watched “The Shallows” on Peacock TV. I thought from the title that it was going to be a biography of The Federal Reserve, but it was a film about a surfer being attacked by a shark.

Inflation Nation! Fed’s 5Y Forward Breakeven Inflation Rate Plunges To Lowest Of Biden’s Presidency As Fed Hikes Rates (Mortgage Rates Resume Soaring)

US inflation is the highest in 40 years, yet inflation may be slowing as 1) The Fed cranks up interest rates and 2) the global economy is slowing.

US inflation data in the coming week may stiffen the resolve of Federal Reserve policy makers to proceed with another big boost in interest rates later this month.

The closely watched consumer price index probably rose nearly 9% in June from a year earlier, a fresh four-decade high. Compared with May, the CPI is seen rising 1.1%, marking the third month in four with an increase of at least 1%.

While persistently high and broad-based inflation is seen persuading Fed officials to raise their benchmark rate 75 basis points for a second consecutive meeting on July 27, recession concerns are mounting. There are signs, though, that price pressures at the producer level are stabilizing as commodities costs — including energy — retreat.

But the expectations of inflation, as measured by The Fed’s 5-year forward breakeven inflation rate, just crashed to 1.8437%.

The breakeven inflation rate is a market-based measure of expected inflation. It is the difference between the yield of a nominal bond and an inflation-linked bond of the same maturity.

The USD Inflation Swap Forward 5Y5Y is also falling like a rock as The Fed hikes their target rate (green line).

Could it be that inflation is cooling with Fed rate hikes (but not the shrinking of their $8 trillion balance sheet)?

Currently, Fed Funds Futures are pointing to a Fed target rate of 3.552% by February 2023. And with that, Bankrate’s 30-year mortgage rate rose to 5.75%. Once again, like velociraptors from Jurassic Park, The Fed’s balance sheet is still out in force.

Fed Chair Jerome Powell and Atlanta Fed President Raphael Bostic are keeping The Fed’s balance sheet at near $9 trillion as they hunt assets to inflate.

Home Listings Surge in Turnabout for Supply-Starved US Market (Are Homeowners Seeing An End To Home Price Growth With Fed Rate Increases??)

The Federal Reserve under Berananke, Yellen and Powell kept monetary stimulus out there too long and rates too low, but Powell is now trying to reverse that trend to fight inflation. But how will that impact the housing market?

(Bloomberg – Prashant Gopal) The housing slowdown is helping to solve one of the US real estate market’s most intractable problems: tight inventory.

With fewer buyers competing, the number of active US listings jumped 18.7% in June from a year earlier, the largest annual increase in data going back to 2017, Realtor.com said in a report Thursday. And new sellers entered the market at an even faster rate than before the pandemic housing rally began.

The Federal Reserve is cooling off the red-hot housing market as it fights to curb inflation by driving up interest rates. The resulting spike in mortgage costs is making homes less affordable and pushing would-be buyers to the sidelines. That means properties aren’t selling as quickly and must compete with the growing number of new offerings.

I wonder if it is all the Covid monetary and fiscal stimulus that is finally getting homeowners to put their houses on the market, perhaps fearing the end of the housing price run-up with Fed-induced rate hikes?

Let’s see if The Fed’s Frolic Room (aka, open market committee) keeps driving rates up and home affordability down. Or is it The End for the house price bubble?

Winter Is Coming … For Mortgage Markets! Monthly Mortgage Payments SOAR As Fed Tightens Noose On Economy

We’ve got a line on The Federal Reserve. They don’t seem to care about housing and the mortgage market.

Monthly mortgage payments are soaring as home prices soar AND mortgage rates soar.

Mortgage rates have soared with Fed noose tightening.

Something has to give. Otherwise, winter is coming.

The theme song of The Federal Reserve thinking that rising prices can be tamed by raising rates is “Dear Mr Fantasy.”