ILCB - Swap And Credit Spreads Still Say No Recession

2023-05-09 02:25:00 ET

Summary

• It's true that the Fed is very tight and the yield curve is very inverted - both being classical precursors to recessions in the past.
• While some observers note with concern the unprecedented decline in the M2 money supply over the past year, I view it as a welcome return to something more normal - after all, M2 is still significantly higher than its historical trend vs nominal GDP.
• An easing of inflation would go a long way to restoring faith in the future since the market would view the Fed's job as mostly done - with declining short-term interest rates breathing life into most areas of the economy.

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