I have been bullish on the US economy and US stocks for 10-years. I made a few post back from 2017 that stated a 2008 style recession was not in the cards. You can see my posts here and here.
In 2020, I warned about inflation. It was the easiest call I ever made. A summary of my post on inflation are found here. In short, money and credit went vertical. Below is the 2020 M2 money supply growth from 2020. The numbers below show levels that surpassed all previous records by large numbers going all the way back to when records were first kept.
There are a few indications that a recession might be coming.
First, the yield curves are inverting.
I have detailed previously the reason the yield curve inverting is a sign of a recession to come. You can see my post here.
More importantly, the money supply is crashing from a very high number.
It tends to start dipping around this time of year going into the fall. This is one of the reasons most recession and stock market crashes happen in September/ October months. Given that we are already at 5%, the tendency for a seasonal decline could put the growth to low single digits. It may even go negative like it did in 2008. This was an obvious sign in 2008 that a stock market crash was about to take place.
If these trends continue, we will have a recession within the coming months. I will be closely following the H.4.1 and H.6 publications over the next few weeks to see if these trends continue.
The Federal Funds Rate
This has nothing to do with the federal funds rate. It is a meaningless interest rate. Its the interest rate banks charge each other overnight. But inter bank lending has been dead since 2008 when the Federal Reserve began to pay interest on excess reserves. Why would bank A lend to bank B for 1.5%, when they can let it sit with the Fed risk free for 1.65%.
This is the reason inter bank lending has died. I find it amazing the amount of time and articles written on the Fed Funds rate. It has become meaningless.