There Is No Immediate Risk Of A Recession

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In his Daily market Notes report to investors , while commenting on the risk of a recession, Louis Navellier wrote:

• 1. Too Close for Comfort
• 2. No Recession
• 3. Healthy Housing
• 4. Coffee Beans

The federal Open Market Committee (FOMC) statement on Wednesday telegraphed potentially six more 0.25% key interest rate hikes, which was not as dovish as I expected . However, Fed Chairman Jerome Powell's press conference did seem to reassure investors that the Fed would raise key interest rates gradually.

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The yield differential between the 2-year Treasury note and 10-year Treasury bond is now too close for comfort and likely will cause the Fed to hesitate on further interest rate hikes. Under no circumstances does the Fed want to invert the yield curve, since it would cause undue stress on the banks that the Fed regulates. 

I should add that the U.S. dollar remains strong against the British pound and euro. If the Fed did raise key interest rates six more times, the U.S. dollar would likely continue to appreciate against our major trading partners . Fed Chairman Powell has already said that if the euro keeps its key interest rates low, especially since the European Union (EU) is widely perceived to be in a recession, it will influence the Fed to“go slow.”

Due to low global yields in the EU and Japan, it will naturally prohibit the Fed from raising key interest rates too much, otherwise, the U.S. could also slip into a recession . By the way, the Atlanta Fed revised its first-quarter GDP up to an annual pace of 1.2%, up from a 0.5% annual pace previously estimated, so there is no immediate risk that the U.S. will fall into a recession .

The Labor Department on Thursday announced that new weekly unemployment claims came in at 214,000 in the latest week. Continuing unemployment claims came in at 1.419 million. Overall, the fact that unemployment claims continue to fall remains very encouraging.

The Commerce Department on Thursday announced that existing housing starts rose 6.8% in February , which was significantly better than economists' consensus estimate. Single-family home starts rose 5.7% in February, while multi-family home starts rose to a record annual pace of 554,000. I should also add that building permits eased 1.9% in February. Overall, the housing market remains healthy.

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Updated on Mar 17, 2022, 3:57 pm

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