About That Recession…
How’s Your JULY Looking?
For the first time in 2023, I think the U.S. economy is likely to experience a mild recession. Up until now, my outlook has been sluggish growth or no growth (flat growth), but the prospects of a GDP contraction now seem plausible.
71% of GDP is consumer spending, and consumers are slowing down.
Fed Chair Powell’s favorite yield curve-based recession signal hit a new record low, which means it is the most inverted it has ever been. To me, this means that EVEN IF the U.S. doesn’t officially enter a recession, the FED will certainly behave as if it’s here.
Courtesy: Zerohedge.com, Bloomberg
Don’t forget that this is Powell’s most trustworthy recession prediction tool, and it carries a lot of weight. The tool hasn’t failed him, and he can’t ignore it since Wall Street knows it is what he uses.
I want to go back to the consumers because they hold the key to the fate of the GDP.
Economic conditions are extremely tight. Judging by what I see, the FED is going to sneak in another rate hike in May.
Why is that important?
Think about it from the perspective of forward-looking thinking:
- The market’s only debate is on whether the FED has finished raising rates or if it will do one more. If the FED does NOT raise rates in May, it keeps the door open for a June or July hike, but if they get it out of the way in May, they’re 100% finished.
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If that’s the case, the next move with the same 100% certainty is to begin cutting rates into a slowing economy.
In other words, a rate hike in May is the ultimate bullish indicator for gold and silver.
Why do I say that silver is best stacked now? It’s because when the FED cuts rates into a slowing economy, the dollar enters an official bear market.
No other asset benefits from a wrecked American currency quite like silver does.
- The market’s current expectation is that the FED will announce a rate cut in July. If that ends up being the case, silver could surge and premiums over spot will be crazy.
In racing, the driver is constantly testing where the tires are still performing at the very peak of their ability without passing that point of losing grip.
If the grip is lost, be it because they locked the brakes or pressed the pedal too soon, the way to release the pressure is to let the car go (off the brakes or gas).
That’s why my opinion is that the FED will only allow for a brief recession, if any.
We were facing the abyss in 2008, and silver cratered from $21 to $9 before rallying to $49 in the span of two years.
In 2020, silver fell to $12 before doubling in four months.
Stack now or forever hold your peace.
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