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August 5, 2019 | Recession Watch: Panic Fed Rate Cuts Coming Up

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Fed fund futures say a rate cut cycle has started. The Fed disagrees but will soon come to its senses.

On July 31, Fed Chair Jerome Powell called the quarter-point cut a “Mid-Cycle” Adjustment.

Powell’s statement looks downright ridiculous as Major Currency Wars Escalate in response to “Tariff Man” placing more tariffs on China just a few days after Trump’s Lie of the Day when he actually stated “Trade Talks on Track“.

Trade talks on track indeed! China Halts All US Ag Imports, Trump Accuses China of Currency Manipulation

Baby Steps

Yesterday, I stated Expect Fed Baby Step Cuts Followed by Shock and Awe Panic. Check out the rate hike odds yesterday compared to the above chart.

Rate Hike Odds Yesterday

Remaining Calm No Longer an Option

Overnight, thanks to Trump, a 50% chance of just one more cut (assuming a rate cut in September), is now a 50% chance of three or four cuts total (two to three additional assuming September).

A recession is baked in the cake. Remaining calm is no longer a Fed option. The only question is when?

Recession Cause

When recession hits, many will blame Trump. Not me.

Fed bubble blowing policies and fractional reserve lending are to blame.

Trump will not “cause” a recession. However, Trump’s inane trade policies will make the recession much worse.

The current setup is very similar to the Smoot-Hawley Tariff Act of 1930.

Smoot-Hawley did not “cause” the Great Depression, but it did exacerbate the problem.

“Tariff Man” Trump is making the same foolish mistake.

Mike “Mish” Shedlock

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August 5th, 2019

Posted In: Mish Talk

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