ISMS 3: Will the US Have a Recession or a Soft Landing?

<p>Never has the US gov’t caused such a massive move in GDP. The question is, “which way is GDP going?” Will we see a recession or a soft landing?</p><p><a href="https://myworstinvestmentever.com/getpdf/" rel="noopener noreferrer" target="_blank"><strong>Click here to get the PDF with all charts and graphs</strong></a></p><h2>Reasons for a recession</h2><ul><li>Extreme increases in interest rates are meant to slow down the economy</li><li>The fastest rate-hike cycle by the Fed since the 1980s</li><li>In the 2004 cycle, the target rate was hiked by 4.25% in total</li><li>Same as in the current cycle, but it has now been done much faster</li><li>The massive rise in mortgage rates is dramatically slowing the property market</li><li>This, in turn, leads to crashing prices, which will make people feel less wealthy and hold them back from spending</li><li>The yield curve has inverted, which has perfectly predicted prior recessions</li><li>All recessions in the US since 1968 were preceded by an inverted yield curve</li><li>The average time from inversion until the recession started was about 1 year (about mid-2023)</li><li>The surge in spending supported by gov’t handouts is working itself out of the system</li><li>Since 2Q21, households have demonstrated stronger than usual spending behavior</li><li>Strong wage growth has contributed to more savings in 4Q21 onward</li></ul><br/><h2>Reasons for a soft landing</h2><ul><li>High employment means the economy is robust and can withstand the rate hikes</li><li>Companies are highly profitable, which will allow them to bear a slowdown more easily</li><li>Companies are sitting on tons of cash</li><li>Individuals slowed their spending in anticipation of an economic slowdown</li><li>Democrat party leadership will pump things up (e.g., strategic petroleum reserve)</li><li>US banks are in a strong position, holding lots of cash and gov’t bonds</li><li>Reducing the risk of a financial sector crisis that would exacerbate an economic crisis</li><li>At the end of 2021, the banks had nea