Hey There Income Hunter,

Now that Q2 is in the books, guess what the latest Fed GDPNow estimate for Q2 is?

-1%.

Yes that is right folks, if correct, the US will officially be in a recession. (And I’m sure it’s AT LEAST that bad.)

Now, the funny part is this, on Wednesday Jerome Powell was in Europe, and according to reports he said …

“We hope growth stays positive.”

This is the same guy that has been pounding the table on how strong the consumer and the labor market is. 

Powell is considered by many to be the most important central banker in the world. Yet in times of stress for all hard working Americans, his rally cry is “hope?”

Is Jay Powell going soft all of a sudden? 

Well, today we will take a look at why he may be – and what that means for the markets heading into a “pivotal” Fed Meeting in July.

Powell Prepares

I’m  sure Powell is lining up his excuses right now for why he did not see this recession coming. The funny thing is his own reserve bank is flagging it.

First up is the Atlanta Fed’s GDPNow forecast … I mean, I have been as bearish on the economy as anyone, but I didn’t think GDP would be down this much. 

Jobs Market Signs

Job postings growth in the restaurant sector has slowed significantly from 2021 peaks and just turned negative in April. 

Even worse for unemployment expectations is that the greatest rise in fear of higher unemployment is coming from the upper-income crowd.

No doubt the banking industry will get decimated as the recession deepens and lasts longer than anyone thought possible.

Lastly on the housing front is the likelihood of homeowners getting evicted in the next two months …

This is just the beginning especially if the Fed is going to keep their hawkish charade going beyond the next couple of months.

Here are the facts … 

There is a high probability of inflation finishing the year above 6%, no matter what the Fed does. 

So, the longer they delay the inevitable pivot, the more damage they inflict on the system.

Ultimately, going back to QE is a must unless J-Pow and co. want to risk insolvency from the debt load plus falling tax receipts. 

Bring It Home

Andrew Giovanazzi has added a long China Tech ETF (KWEB) call spread paired with a SPDR S&P 500 Trust ETF (SPY) put spread into the mix for Power Gains.

China may be the only country in the world with a growing economy. 

The lockdowns created pent up demand and now the data is showing the growth. This week, the Chinese reported a huge positive surprise to their purchasing manager index in May from 47% to over 52% … 

July should bring an onslaught of weak economic and earnings data for the US,  but before that is the best weekend of summer so enjoy the long weekend and as always …

Live and Trade With Passion My Friend,

Griff