No Soft Landing for the US Economy...
I know everyone is optimistic that fears of a deep recession have passed, based on consumer spending, a hot job market and historically low unemployment, but I believe we are in a precarious position and that the current outlook is being fueled by false optimism, as opposed to reality.
There are number of events or underling factors that could burst this bubble of hope, either directly or though unintended consequences. I will share three:
ONE: extreme members of the Republican Party hold the reigns in Congress, and have a stranglehold on their party leadership. As a group their only goal is to sow chaos by picking ideological and unnecessary fights with no end-game or policy goals. They simply want to play chicken with the other side, as we are witnessing with the current debt ceiling debate.
TWO: unintended economic consequences resulting from the decoupling of US and China economies that is underway on two-levels: a) US companies moving manufacturing bases away from China b) US government efforts to curtail Chinese tech advancements in AI, quantum computing, etc. by limiting exports and blocking their use around the world.
THREE: if you look beneath the rosy retail sales, hot job market, not rising inflation and low unemployment, you will see: a) the number of Americans are spending more than they earn continues to rise, as savings decline. b) The New York Fed Q1 2023 report on household debt showed a record-high debt level of $17 trillion with persistent credit card debt and rising delinquency rates. Normally, Q1 sees debt decline with people paying off what they spent during the holiday season but for the first time since the Fed started tracking debt 20 years ago, this was not the case. c) a record-high share of renters are spending more than 30% of their income on rent each month. d) only 1 in 3 can comfortably cover a $400 emergency expense. e) at the end of 2022, 64% were living paycheck to paycheck. This does not bode well and when the crash comes, I see the DOW correcting to the 22,000-24,000 range. Hope I am wrong!










