Some illustrations are optical illusions. When two people view the picture, they may see completely different images. A good example is Rubin’s Vase. One viewer may see a vase, while another sees two faces.
Current economic conditions can be interpreted in different ways, too. Recent economic data and a possible credit crunch, resulting from upheaval in the banking sector, suggest growth is slowing. After viewing the data, some say we’re heading for a soft landing, and others say a recession is coming. Here is the recent data:
Randall Forsyth of Barron’s reported, “The solid employment report for March further raises the odds that the U.S. economy is headed for a proverbial soft landing.” Not everyone agrees.
Economist and former Treasury Secretary Lawrence Summers gives more weight to manufacturing and services data than employment data. He also pointed to the Dallas Federal Reserve’s Banking Conditions Survey, which showed lending volumes declined sharply in March. Summers told Bloomberg’s Wall Street Week with David Westin:
“Employment and unemployment are lagging indicators of what’s happening in the real economy…There is some substantial amount of constriction in credit. If you looked at the forward-looking numbers this week from the PMI surveys, those numbers were quite weak…Recession probabilities are going up at this point. The Fed has a very, very difficult decision ahead of it.”
Major U.S. stock indices finished the week with mixed results, reported Carleton English of Barron’s. In the Treasury market, yields on many shorter-maturity increased, while yields on longer-maturities fell.
https://www.barrons.com/articles/fed-inflation-economy-jobs-report-rate-hikes-a43e0d82 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-10-23_Barrons_A%20Solid%20Jobs%20Report%20Suggests%20One%20More%20Fed%20Rate%20Hike%20in%20May_6.pdf)
https://www.bloomberg.com/news/videos/2023-04-07/-the-fed-needs-to-engage-in-some-serious-soul-searching-video [The Fed Needs To Engage In Some Serious Sole Searching. 0:43]
https://www.barrons.com/articles/stock-market-dow-nasdaq-s-p-500-fed-dividends-97aaef90?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-10-23_Barrons_Tired%20of%20Waiting%20for%20the%20Fed%20to%20Pivot_9.pdf)
https://www.barrons.com/articles/fed-interest-rates-investing-mantras-51662006600 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/04-10-23_Barrons_The%20Fed%20is%20Hawkish_11.pdf)
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf (Figure 2)
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* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
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