It’s a gorgeous autumn afternoon in the MidAtlantic, so I’m working outside today. Every 3 minutes or so, a chipmunk scurries by—the same little chipmunk, back and forth, back and forth. He’s gathering dry leaves from the front yard, scuffing across the driveway, and stashing them somewhere around back.
He is undisturbed by my presence. He’s got his own shit to worry about. He’s getting ready. Colder weather is coming and he’s…I wouldn’t say anxious, but aware.
He’s doing a number on the mulch bed out front, but I’m still kind of rooting for him. Cute little bastard.
Something about the falling leaves, shorter days, and permeating stench of economic dread–it all just makes me sentimental.
We’ve been talking about animals around here a lot lately—Bulls, Bears, Apes…Pigs.
But this morning, I’m hung up on the chipmunk.
Not sure if we should be anxious, but we should be aware. And we should most definitely be prepared.
The Blurst of Times?
We’ve spoken with a lot of our heavy friends. Everybody has a slightly different opinion about the short-term outlook for our economy—soft landing, hard landing, recession, or time paradox, the results of which could cause a chain reaction that would unravel the very fabric of the space-time continuum and destroy the entire universe.
Point is, views differ on what’s up ahead. But most everyday Americans are feeling what this week’s Let’s Talk Markets guest Claudia Sahm describes as a general sense of gloom.
We don’t know exactly what’s coming. We just know it’s gonna hurt. And how do we know?
Well, Claudia seems to suggest that it’s because we’ve been hurt before.
We have what you might call a pandemic hangover. Things aren’t really back to normal, are they?
The global supply chain is a cluster of fucks. City bars and restaurants are still struggling to staff jobs, which sucks if you like getting what you actually ordered. And regardless of what the numbers say, cooling inflation seems to have almost no relationship to how uncool supermarkets are about prices.
Add to that the relatively novel and foreboding sense that at some moment, everything could suddenly grind to a screeching halt. To wit, with all the talk of global climate change and nuclear proliferation in my childhood, I didn’t have ‘global pandemic’ on my Doomsday Bingo Card before 2020.
I do now.
At Least It’s October.
Nothing bad ever happened in October, right?
We’ve all heard the chilling visions of things to come from economists. The Expectations Index–which measures the way consumers feel about the short-term outlook for the U.S. economy–fell from 83.3 in August to 73.7 in September. Generally speaking, the term recession gets thrown around a whole lot when that number dips below 80.
Stubbornly high prices on gas and groceries, along with record high interest rates, are at least in part to blame. Even if those higher interest rates are meant to temper inflation–and they have–consumers haven’t felt that tempering.
In fact, now we’re feeling the pinch from all sides. Gas and groceries are still priced for an inflationary market. Meanwhile, skyrocketing interest rates are pricing many consumers out of big-ticket purchases like cars and homes.
Not that I’m panicking.
The Grateful Dread
On the bright side, consumers view the current labor market in relatively positive terms. More consumers said jobs were plentiful in September–40.9%--than did in August–39.9%.
But don’t mistake this for optimism. Americans who are grateful for the current job situation may have eroding confidence about the security of this situation in the near term.
In September,
In spite of consumer skepticism, some have trumpeted robust GDP growth and the Fed’s incredible success at calming inflation while suggesting that the crisis has already been averted.
Take the St. Louis Fed’s cheerful exclamation on August 30th that “The strategy that the Federal Open Market Committee (FOMC) has pursued to return inflation to its 2% target rate without triggering a recession and widespread layoffs appears to be paying dividends.”
Ok. We’ll just file that under shit you might regret putting in print at some point in the not-too-distant future.
Unicorns, Soft Landings and Other Made Up Things
Indeed, we won’t venture to predict the future. This sense of gloom is just that–a sense. Then again, there aren’t too many points in history where the types of trends we’re seeing haven’t added up to recession.
Most analysts have moved on from the discussion of whether things are going to get worse, and on to the conversation of how much worse they may actually get.
The most optimistic projections suggest something called a “soft landing.” The presumption is that both inflation and employment cool off, some jobs are lost, and some corporate investment initiatives are scrapped, but that we would experience something short of dire economic straits.
But is that a real, actual thing? It’s come up a lot lately in discussions with our experts. Dave Lauer asks a valid question during this week’s episode of LTM. Is the soft landing a fairytale we tell ourselves so we can sleep at night?
Well again, we can’t predict the future. But we can look at history, which is filled with damning examples of misplaced optimism on the eve of our greatest financial calamities.
Just ask the Federal Reserve of Dallas, who offered this sunshiney perspective:
“U.S. inflation pressures are easing and the economy should manage a soft landing, the Federal Reserve Bank of Dallas said on Wednesday.”
All rainbows and gumdrops up ahead, nay?
They said that on September 26th, 2007.
If you don’t know how that turned out, I won’t spoil the ending for you. It’s a killer plot twist.
So pardon me if I prepare for the soft landing with pads and a parachute.
Be the Chipmunk
We’re optimists by nature here at Urvin. We have to be. You can only change things when you have the ability to envision something better.
But we are also realists. Like the chipmunk, we are not anxious, but we are aware, and we are preparing.
Dave Lauer is a co-founder and CEO of Urvin Finance, where he leads the team in building Urvin Terminal. Prior to founding Urvin Finance, Dave spent over a decade advocating for financial market reform after quitting his job as a high-frequency-trader.