JANUARY 13, 2024 – No one took me up on my offer to ask me to forecast something…anything. However, I have found a web site that holds forecasting contests on an ongoing basis. The main contest for this year has 36 questions. I won’t bore you with all of them. But, I will list my initial forecasts for a few questions you might find pertinent. I will likely change my %’s weekly or monthly. Here goes….The percentage after the question is my forecast.
Will the S&P 500 Index go up over 2024? 90%
Will annual US Core Inflation be above 3% in December 2024? 32%
Will the Fed Funds Rate on December 31, 2024 be below 4%? 4%
Will the US unemployment rate be above 4% in November 2024? 54%…this one is a tossup. A key word is ABOVE 4%. If it included 4%, I would be much higher on my %.
There are several questions Re Trump and the Election and other political issues. I will just stick with economic questions here.
We shall see how I do. It is nice to finally be measured on how accurate my forecasts will be. I will let you know the results when the contest is over – I believe that will be early next year.
Shalom,
The Mann
Tag Archives: Fed Funds Rate
INFLATION UPDATE
OCTOBER 13, 2023 – The October report came in at 3.7%, just below my forecast of 3.8%. The 3-month annualized inflation rate is 3.6%. The 6-month annualized inflation rate is 4.0%. These figures bracket the annualized rate (3.7%) and thus indicate the annual CPI should not change much.
Based on the data, my prediction for next month’s figure is 3.6%. I think this might be a tad low. But, it would surprise the market to see it tick down.
The December and January reports should show annual CPI for 2023 to be above 4%. That should not make the Fed happy. At least one more Fed Fund Rates hike seems certain.
Shalom and Prayers to my Brothers and Sisters in Israel.
The Mann
(MIS)LEADING ECONOMIC INDICATOR & MORE
SEPTEMBER 25, 2023 – Most importantly, only 3 months to Christmas:) And I am sure you have seen all of the Christmas stuff in the stores already. Next year it will be out in July. Ridiculous.
Two more recession indicators are wrong this time around. The (Mis)Leading Economic Indicator has declined for 17 straight months. I assume its purpose is to forecast a recession to occur within a few months after several negative readings. It has been wrong for over a year. Maybe this is where the broken record (look it up youngsters) recession mongers get their reasoning for thinking a recession is about to occur. Just fyi, the only other times it had this long of a streak was 1973-1975 and 2007-2009. The two worst recessions since The Great Depression.
The third indicator that has been wrong is M-2 Money Supply. It is more negative than it was in The Great Depression! Yet, no recession. In fact, it is looking like 3rd Quarter GDP may show an acceleration in growth to over 2%. However, I will say that is not a lock as I have seen forecasts from 0.5% to over 5.5% (Fed Atlanta). This quarter will be very unpredictable. But, it should definitely be positive and thus we can officially close the case on there being no recession in 2023.
Let me bring something up for the first time. I think I will be harping on this for the next few years. I believe the reason many prominent indicators are wrong this go around is due to what has happened since the pandemic. Almost all indicators soared to extreme high readings never seen before. And many are falling to record lows. What I am seeing is if you draw a straight line from say 2010 or 2015 through 2023, these indicators are exactly where they should be. i.e. The lows are evening out the highs and overall we are reverting to the mean.
I saw this recently in national retail sales. Adjusted for inflation, retail sales have been flat for the past 18-24 months. However, they increased significantly after the pandemic. If you apply the 2010-2019 compound annual growth rate to 2019 sales, you will be exactly where we are at in 2023. I will discuss more examples and provide more specific information as I encounter graphs showing this occurrence.
FED FUND RATES – The Fed did what it was told to do and held rates the same in September. Also, they went ahead and said what the market has forecast for a long time and that is another rate hike lies ahead. The 100% trend of the Fed following the market continues.
HOUSING – As I noted in a prior blog, the market is signaling weakness in the housing market after forecasting the strength we have seen all year. The homebuilder stock index has declined 10% from its July top. We need to continue to watch this play out. It is telling us we should see weakness next Spring. What will slow the accelerating strength in the housing market? Maybe 8%+ rates on 30-year mortgages? About the only thing I can think of. But, it doesn’t matter. The market just says it will happen. The price trend in the 4th Quarter will tell us if the Spring slowdown is just that or the start of a more significant downturn like we had in the second half of 2022.
REGIONAL BANKS – These stocks have declined a significant 15% from their July highs. Basically, they declined some more after the SVP failure, then soared over 40%, and now down 15% – in the end, they have gone nowhere since the Monday after the SVP failure. What is the market telling us? It definitely says not to expect the 250-400+ bank failures that so many people are predicting. Those people expected such to occur by now, in fact. As far as I know, the number remains at one small bank in Kansas. In regard to CRE loans, banks have been refinancing these all year long at higher interest rates. I haven’t heard of any significant issues. The problems have occurred in the CMBS market – gotta hand it to the supposed smartest lenders and investors in real estate:)
INTEREST RATES – Treasury Bonds have broken below last October’s low. This means interest rates are at new highs for this downturn. As I write this, I see a headline saying they are at the highest level since 2007. However, we are now on the clock to look for a final bottom in this multi-year downturn in prices (increases in yields). That doesn’t mean it will occur next week. I am thinking it is several months away. Maybe around the beginning of the year. Too early to give a reasonable forecast re timing and price (yield). The 4th Quarter price action will get us much closer to predicting when the bottom is in. What should follow will be a strong bond rally back to the range of the Summer 2022 and April 2023 highs (lows in yields). First things first. Let’s have the current downturn play out and get a bottom in place. Bottomline, mortgage rates will not be going down the remainder of the year. And they might head over 8% on the 30-year mortgage.
Well, that was a lot to cover. I will probably post again once we get the October inflation reading.
Til then, Happy Fall.
Shalom,
The Mann
THE MARKET AND THE FED FUNDS RATE
AUGUST 31, 2023 – As we end August, a quick look at what the market is telling the Fed to do at its September 19-20th meeting. 3-month and 6-month Treasury Bills are yielding 5.56%-5.58%. The Fed Funds Rate is at 5.25%-5.5%. That is saying not to raise the rate. However, it wouldn’t take much for those rates to get to a point where the market says to raise rates by another 25bp.
For awhile the market has said no change in September and a 25bp increase in December. That seems to still be the case. We will see if anything changes over the next few weeks.
Have a great Labor Day weekend.
And good riddance to July and August!
Shalom,
The Mann
STOCK MARKET and BABY BOOMERS
AUGUST 18, 2023 – The stock market fell through a critical level this week. Thus, I wanted to get my thoughts out there as to what appears to be happening and what we need to keep an eye on. As I continually complain about, you cannot be a broken record and hope you are right eventually. The market clearly tells us in advance what is going to happen.
The Dow 30 peaked on August 1st. It is down just about 4% as of today’s low. That is a minor decline. But, in the Elliott Wave Theory the decline crossed a level that should not have been broken. As such, we have to be alert to a trend change.
What the market has told us so far is that the economy will be fine into the 1st Quarter of 2024. There is basically zero chance of a recession occurring in the last two quarters of 2023. In fact, it is telling us that the news will be great this Winter. That said, if August 1 becomes a significant top, then the market is telling us that a chance of a recession by next Fall may occur. It will be October 2024 before we could have confirmation of two consecutive quarters of negative GDP. That assumes the 1st Quarter 2024 GDP will be positive.
It is just difficult to believe that right before the Presidential Election we will have confirmation of a recession. The incumbent administration does all it can to avoid such from occurring. That is why the first year of a new president is when a recession usually occurs.
The Regional Bank Index has had its largest decline since the bottom in May. It is down 11% from its recent high. The Homebuilders Index is down 6.5% from its recent high. The NASDAQ is down 8% from its recent highs. But, the NASDAQ’s waves are in better shape than the DOW 30. We will see if the indices align or keep diverging.
Treasury Bonds are about to break to new lows. Thus, interest rates are hitting new highs. The 30-year mortgage rate is above 7% again. It has been awhile since I called the top last year to the exact day. These are the highest rates in 21 years.
Ten-year treasuries are at 4.25%. The waves are projecting a move to 4.54%. The current rate is the highest in 12 years.
If the waves play out as expected, rates should go up about another 1/4% and then decline to the 2.5% to 3.3% range over the next year or such. The incumbent administration would certainly like that to happen during an election year! This scenario matches up with the market’s expectation that the Fed Funds Rate will be lowered 2 or 3 times in 2024.
My feeling is rates are finally back to market levels. We have had government-controlled, artificially low interest rates for most of the past 8 or so years. We are finally at a level where rates reflect the risk of underlying assets like bonds and real estate.
The market is at a critical stage. How it plays out will tell us what will happen in the Spring.
In regard to us Baby Boomers, I came across the following stats from Quill Intelligence. About 10,000 Baby Boomers turn 65 every day; seven in ten will need long-term care in their lifetime. The number of Americans over the age of 85 is expected to more than double from 2019 to 2040, from 6.6 million to 14.4 million. An estimated 711,700 caregiver jobs will open up every year from 2021 to 2031.
The good news is us Baby Boomers will remain in charge of the power positions and almost all of the world’s wealth for another 10-20 years. The generation before us earned the title The Greatest Generation. But, the Baby Boomer generation provided the peak for the world that hasn’t been seen since The Roman Empire. Things will decline generation after generation for hundreds of years to come. I do think we have just begun The Dark Ages II.
I guess I should end this cheerful post here.
Shalom,
The Mann
INFLATION UPDATE
AUGUST 11, 2023 – The August report came in at 3.3%, just below my forecast of 3.4%-3.5%. The 3-month annualized inflation rate is 3.1%. The 6-month annualized inflation rate is 4.4%. These figures bracket the annualized rate (3.3%) and thus indicate the annual CPI should be range bound for awhile.
Based on the data, my prediction for next month’s figure is 3.5%-3.6%. I like the data and am confident the next reading will be in that range or a tick lower like this month.
Through the October report, the annual CPI figure should be about as boring as a Miami weather forecast – 88 degrees/77 degrees, 88/77, 87/77, 88/76…I expect annual CPI to trend around 3.5% (plus or minus 0.1%-0.2%) through the October reading.
As an aside, the market is telling the Federal Reserve not to raise the Fed Fund Rate at its September meeting.
Til next month’s report.
Shalom,
The Mann
THE REMAINDER OF 2023 – ECONOMY
UPDATE JULY 27, 2023 – 2nd Quarter came in at a whopping +2.4%. Far exceeding expectations that were below +1.5%. So, we have an economy that has expanded, not contracted, this year! The stock market told us this would happen. For anyone you know that has been predicting a recession in 2023, please ask them if they admit they have been totally wrong. People need to admit their errors and stop being broken clocks. If they don’t, they have no credibility. As I note in my original post below, it is likely the current forecast of +0.5% and 0.0% for the remaining two quarters will change to the upside as the year carries on. Will the economy slowdown from +2.0%-2.4%? Yes. The stock market has said it will be stagnant the remainder of the year. But, will we see two negative figures in a row? The odds are near zero. Plan accordingly.
JULY 22, 2023 – It is all but guaranteed that the recession mongers will be wrong about such occurring in 2023. As I forecast earlier in the year, by Summer (i.e. now) those people would begin to move their prediction to a recession occurring in 2024. Enough time wasted on the large group of media and economists that are broken records.
So, what does the future hold. The past 12 months have been very easy to predict for the economy, housing, and inflation. IF you just read what the stock market (i.e. Dow 30) is telling us. Yes, it is that simple. And, yet, 99%+ of the public and pundits don’t do it.
The Dow 30 peaked in December 2022 after bottoming in October 2022. That told us to expect weakness thru April 2023. Sure enough, the Silicon Valley Bank collapse and the associated bank panic occurred in March and April.
Since December 2022, the stock market trended sideways for 8 months. Just this past week the Dow finally broke thru the 35,000 level after about 7(!) failed attempts. So, what does this tell us? It tells us that the economy is expected to be stagnant for the last 6 months of this year. And, based on this upside breakout, the economy should see an uptick in the 1st Quarter of 2024. This is a very early interpretation as the breakout just occurred this week and is only a small amount above the December 2022 high.
Is the stock market, and thus smart money, correct? Yes. As usual. 1st Quarter GDP was +2.0% (revised from the initial report of 1.3%). 2nd Quarter GDP is project to be +1.3%-1.4%. But, 3rd and 4th Quarter GDP are expected to be barely in positive territory. Exactly what the stock market has told us would be the case for the past 8 months – a stagnant Dow 30 forecasts a stagnant economy 6 months out.
Forecasts obviously vary. I have seen most to be around +0.5% for the 3rd Quarter and 0% for the 4th Quarter. But, I think those forecasts are trending up due to the strengthening housing market (that will be my next post, so please come back:) ).
The recession mongers will be screaming they told us the economy was caving. One, they have been calling for a recession for over a year (right after the actual recession just ended!) and GDP has come nowhere two negative quarterly figures in a row. Two, the stock market has forecast the ups and downs with 100% accuracy. It hasn’t been a broken record.
Based on my forecast that the CPI will trend up the remainder of the year, I suspect the market will tell the Fed to raise the Fed Funds Rate several more times. Note, the public is wrong to blame Powell for raising rates. He is simply doing what the Fed has done forever – following exactly what the market has told it to do. So, the market has obviously priced in all Fed actions ahead of the Fed meetings because the market told them what to do at the meetings!!!
But, I digress…..my point is the recession mongers will remain a broken record as they will continue to say that the Fed’s raising of interest rates is going to push us into a recession. As of today, the stock market says they are wrong and a recession is not going to happen. I put my money on the stock market instead of all of those economists that have been 100% wrong for the past year (and longer).
I believe my forecast of the housing market will be my next post. I will probably combine it with a brief discussion on banks.
Shalom,
The Mann
INFLATION ESTIMATE FOR YEAREND 2022 & A 6-MONTH LOOK INTO THE FUTURE
DECEMBER 25, 2022 – The December CPI reading comes out on January 12th. My forecast for November was 7.5%-7.8% and it came in at 7.1%. I am making my forecasts at the high end so as to be a ceiling. Albeit, the November reading was lower than I expected.
My December forecast range is 7.0%-7.1%. A narrow range this time. I would not be surprised if it was on the high end again. Also, note this will be the inflation rate for the entire year of 2022.
For those of you who just wanted to know my forecast, you can stop reading now. I am about to let you inside the thinking of The Mann’s brain:) Before I do that, I wanted to say RIP to Coach Mike Leach. There were two minds that I could relate to in my lifetime – Robin Williams and Coach Mike Leach. They had minds closest to how mine operates. I miss them both. So here goes re inflation….
There are economists and others who have been calling for 10% and 12% and higher inflation in 2023. They are simply ‘wishing’ for such for whatever reason. If they have any data to base this on, I would love to see it. I seriously doubt they do.
I think of future inflation as I do to an automobile’s speed. Get ready to hark back to your calculus class:) Acceleration is a derivative of velocity. A car that is going 70mph this second and then 70mph the next second has an acceleration of 0. To go from 70mph to 71mph you must accelerate at a positive rate. To do the opposite you must have negative acceleration. So now let’s take this analogy to inflation….
The current 12-month annual inflation rate is 7.1%. The 3-month and 6-month annualized inflation rates tell us where annual inflation is headed in the near future. Right now, the 3-month annualized rate is 2.1% and the 6-month annualized rate is 3.7%. The deceleration from 7.1% to 3.7% to 2.1% is telling. It will be near impossible for annual inflation to go up for quite awhile. The data says it will be declining towards the Feds target of 2%.
Some observations on how much the rate of inflation is declining…..The 3-month annualized rate peaked at 12.7% in June. It has ranged from 0.7% to 2.4% for the past 3 months. This is your best indicator of current inflation.
The 6-month annualized rate also peaked at 12.6% in June. It has declined significantly to the current 3.7% rate. There is a very good chance this rate will go below 2% in the next few months.
With the 3-month and 6-month annualized rates in the 2% range, it is apparent that annual inflation is headed towards that figure. I think there is a good chance by the end of the 1st Quarter 2023 annual inflation will be below 5%. And by the end of the 2nd Quarter 2023, it should be below 3%.
A side note re the Fed Funds Rate. The average time between the last increase and the first decrease is 4.5 months. This doesn’t mean that on April 27th the Fed will drop the Fed Funds Rate. But, if the Fed sees annual inflation around 5% and steadily declining, it does give hope that they won’t be increasing rates. The first drop might not occur until they see all of the above data solidly in the 2% and under range. That cannot occur until at least the 3rd Quarter of 2023.
So, there you go re the thinking of The Mann. I hope it makes sense. Albeit, I am sure some of it is confusing and I don’t explain enough. If you ever have any questions, just send me an email.
Oh (there’s this non-stop brain thinking away…), let me throw this out there. Back in the Spring I talked about how virtually no one could see home prices declining by the end of this year. And now here we are and that is reality. Is there anyone saying that by April-June next year the economy will be on the rebound? Housing moves slower and follows the economy in changing direction so a bottoming in prices should occur later in the year. Have you seen anyone seeing such occurring? I have not. I only hear about Jamie Dimon and everyone forecasting a recession next year (which has already occurred this year!!!) and overall just a terrible year. I have not seen any forecasts for a turnaround starting slowly in the 2nd Quarter and becoming more apparent in the 3rd and 4th Quarters. I will revisit this forecast in 6 months:)
Shalom and Happy New Year!!! I hope 2023 is a great year for you.
The Mann