The recession has been delayed, not avoided. And is not in the price
Minack Advisors
The Lansdowne Club, 9 Fitzmaurice Pl, London W1J 5JD
Tue 20 Jun 2023 - 14:30 BST
Summary
Gerard explained why the much-anticipated recession has not materialised and is now forecasting a hard landing in the 4th quarter citing GDI < GDP, shrinking real labour income and weakness in goods sectors, which all signal recession. He points out this is the first time in history the Fed has tightened when core inflation has peaked. The Fed need unemployment up to meet inflation targets which statistically is very difficult to do without causing a hard landing. Current earnings forecasts are within 1% of all-time highs. Operational gearing high so a 30% cut to those numbers likely.
Topics
‘the most forecast recession’ of all time has failed to arrive, so far. However, several predictable factors have delayed the downturn, which is likely to start second half
The recession is not priced by equity markets. Last year’s sell off was not the market pricing in this year’s downturn
The next cycle will be different to the post-GFC cycle, and that points to a change in equity leadership
