June 27, 2022
(Brinker) We try to construct these weekly pieces as narrative or mini-narrative essays. This week we are taking a different approach, simply listing the reasons why we think a US recession isn’t pre-ordained.
Before we get to those reasons, we would point out that since 1980, the US economy has been in recession just 13% of the time, and that the yield on the US 10 Year Note has come in by about 40bps, a possible sign the market is increasingly confident the Fed will win the battle against inflation.
- Corporate America, the US consumer is in fantastic financial shape
- Companies hold $7 trillion in cash; excess household savings total $2 trillion
- The labor market is exceptionally strong – sub 4% unemployment rate
- Home prices are at an all-time high; record tappable equity
- Some inflation data points appear to have peaked/have rolled over
- No signs of meaningful sector or industry imbalance
- Credit conditions aren’t overly tight
- Recession call seems the consensus on Wall Street
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