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Macro Monday 59~Japan Interest Rate Hikes Often Lead Recessions Macro Monday 59 Japan Interest Rate Hikes Often Lead Recessions Apologies for the late release this week, I was ill yesterday and I am slowly making a recovery. This week I am keeping it brief however the chart really will speak for itself. If you follow me on Trading view, you can revisit this chart at any time and press play to get the up to date data and see if we have hit any recessionary timeline trigger levels. They are very handy to have at a glance. The chart illustrates the Japan central banks Interest rate history and overlays the last 7 recessions. A few key patterns and findings are evident from the chart which I will summarize below. The Chart - ECONOMICS:JPINTR SUBJECT CHART ◻️ 5 of the last 7 recessions were preceded directly by Japan Interest rate hikes. - Arguably it is 6 out of 7 if you include the 1980 recession with the 1981 recession (which happened as rates were still declining from the original increase). ⌛️The average length of time from the initial hike to recession was 11.6 months. - This would be Jan/Feb 2025 based on the initiation of Japan’s rate increases in Feb/Mar 2024. If you read my material you’ll know that the date of Jan 2025 has repeatedly arisen as a concerning date on multiple charts. This does not guarantee anything other than historical time patterns on multiple charts seem to point roughly towards Jan 2025 as a month of concern. ◻️ The minimum time frame from initial hike to recession was 8 months (Oct 2024) and the maximum time frame 18 months (Aug 2025). This can be our window of concern. ◻️ Its important to note that the rates have remained elevated or increasing for longer than the above timelines outset. In this chart we are only looking at the the first rate increase to recession initiation timeline. We are doing this establish a risk time frame. In the event rates remain elevated into month 11.6 (the average timeframe) we will know we are entering dangerous territory (Jan 2025). Likewise we could go a long as 18 months which is the maximum timeframe. This is all dependent on rates remaining elevated or increasing. A reduction in rates could deter or remove the risk timelines discussed. What happens next is dependent on what the Japan Central bank does. History suggests when they start to increase rates its for a minimum of 6 - 8 months (Sept - Oct 2024), lets see if they pass these months and start to move towards Jan 2025 (the average time line from rate increase initiation to recession). This is a move into higher risk territory. I want to add last week summary as a reminder that multiple other charts are lining up to suggest we may have volatility in the coming 6 months: Macro Monday 58 Recession Charts Worth Watching What to watch for in coming weeks and months? ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ Since 1999 the Federal reserve interest pauses have averaged at 11 months. July 2024 is the 11th month. This suggests rate cuts are imminent. ▫️ The 2 year bond yield which provides a lead on interest rate direction is suggesting that rates are set to decline in the immediate future and that the Fed might lagging in their rate cuts. Furthermore, rate cuts are anticipated in Sept 2024 by market participant's. ▫️ Finally, rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. Yet the market appears to be calling out for this. This is high risk territory. Combine this with a treasury yield curve rising above the 0 level and an increasing U.S. unemployment rate and things look increasingly concerning. (for all of the above charts see last weeks Macro Monday). ____________________________________ As always you can log onto my Trading View press play on the chart to see where we are, and get an visual update immediately on if we are at min, avg or max recessionary levels. PUKA
ECONOMICS:JPINTR
by PukaCharts
4
Market Stress and Bitcoin Price Reversals2008 Financial Crisis: Marked by a severe spike in the high yield spread, significant S&P 500 decline, and aggressive Fed rate cuts to stabilize the economy. COVID-19 Market Crash (2020): Triggered sharp increases in market volatility and credit spreads. The Fed's rapid rate cuts aimed to support the economy. Bitcoin also experienced notable price movements. Interest Rate Cuts: Implemented during periods of economic slowdown or financial stress, leading to narrowing credit spreads and market stabilization. SPX All-Time Highs: Peaks in the S&P 500 indicating market optimism, often followed by corrections during economic weakening. Credit Spreads Narrowing: Indicates improving economic conditions and reduced credit risk, often coinciding with market recoveries. Significant BTC Price Movements: Reflect broader market reactions and investor behavior during major financial events.
FRED:BAMLH0A0HYM2
by managemycrypto
Macro Monday 58 - Recession Warning Charts Worth Watching Macro Monday 58 Recession Charts Worth Watching If you follow me on Trading view, you can revisit these charts at any time and press play to get the up to date data and see if we have hit any recessionary trigger levels. They are very handy to have at a glance. CHART 1 10 - 2 year treasury yield spread vs U.S. Unemployment Rate Subject chart above Summary ▫️ The chart demonstrates how the inversion of the Yield Curve (a fall below 0 for the blue area) coincides with U.S. Unemployment Rate bottoming (green area) prior to recession onset (red areas). ▫️ The yellow box on the chart gives us timelines on how many months passed, historically, before a confirmed economic recession after the yield curves first definitive turn back up towards the 0% level (also see circled numbers showing connecting bottoming unemployment rate). ▫️ Using this approach, you can see that the average time frame prior to recession onset is 13 months (April 2024) and the max timeframe is 22 months (Jan 2025). ▫️ This is only a consideration based on historical data and does not guarantee a recession or a recession timeline however it significantly raises the probability of a recession, and the longer into the timeframe we are the higher that recession probability. ▫️ We typically we have a recession (red zones) either during or immediately after the yield curve moves back above the zero level. At present we are at -0.08 and fast approaching the zero level which is one of the most concerning data points of this week. ▫️ The unemployment rate moved from a low of 3.4 in April 2023 to 4.3 in July 2024. This is a significant increase and is typical prior to recession onset. Conclusion ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ The Sahm Rule triggered this week which has been one of the most accurate indicators of a recession starting. It is triggered when the three-month moving average of the U.S Unemployment Rate above rises by 0.50 percentage points or more, relative to its low over the previous 12 months. The Sahm rule triggering adds to recession concerns, however the designer of the rule has stated that I may not be accurate factoring in recent events like COVID-19 which has thrown unemployment and economic data to extremes. What is the 10-2 year Treasury yield spread? The 10-2 year Treasury yield spread represents the difference between the yield on 10-year U.S. Treasury bonds and 2-year U.S. Treasury bonds. It’s calculated by subtracting the 2-year yield from the 10-year yield. When this spread turns negative (inverts), it’s significant because it often precedes economic downturns. An inversion suggests that investors expect lower future interest rates, which can signal concerns about economic growth and potential recession. In essence, it’s a barometer of market sentiment and interest rate expectations What is the U.S. Unemployment Rate The unemployment rate is calculated by dividing the number of unemployed people by the total labor force in the U.S (which includes both employed and unemployed individuals). CHART 2 Interest Rate Historic Timelines and impact on S&P500 Summary ▫️ This chart aims to illustrate the relationship between the Federal Reserve’s Interest rate hike policy and the S&P500’s price movements. ▫️ This is obviously pertinent factoring in the expectations of a rate cut in Sept 2024. This chart which I shared in Sept 2023 may have accurately predicted this likely Sept 2023 interest rate cut but is this positive for the market? ▫️ Interest Rate increases have resulted in positive S&P500 price action ▫️ Interest rate pauses are the first cautionary signal of potential negative S&P500 price action however 2 out of 3 pauses have resulted in positive price action. The higher the rate the higher the chance of a market decline during the pause period. ▫️ Interest rate pauses have ranged from 6 to 16 months (avg. of 11 months). ▫️ Interest rate reductions have been the major, often advanced warning signal for significant and continued market decline (red circles on chart) ▫️ Interest rates can decrease for 2 to 6 months before the market eventually capitulates. ▫️ In 2020 rates decreased for 6 months as the market continued its ascent and in 2007 rates decreased for 2 months as the market continued its ascent. This tells us that rates can go down as prices go up but that it rarely lasts with any gains completely wiped out within months. Conclusion: ▫️ Rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. This is high risk territory. ▫️ During the week I seen the 2 year treasury bill which matches closely the Federal Reserve interest rate cycle. The spread developing between the two suggests rate cuts are imminent. Remember point one above. The chart below: CHART 3 Relationship between 2 Year Bonds and Interest Rate ▫️ Very briefly, you can see the red areas where gaps formed when the Federal Reserve interest rate was lagging behind the 2 year treasury bonds declines. ▫️ Currently there is a large gap of 1.74% between the two data sets. The last time we had gaps like this were prior to the 2000 and 2007 recessions. Even prior to COVID-19 you can see the Federal reserve was playing catch up. What to watch for in coming weeks and months? ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ Since 1999 the Federal reserve interest pauses have averaged at 11 months. July 2024 is the 11th month. This suggests rate cuts are imminent. ▫️ The 2 year bond yield which provides a lead on interest rate direction is suggesting that rates are set to decline in the immediate future and that the Fed might lagging in their rate cuts. Furthermore, rate cuts are anticipated in Sept 2024 by market participant's. ▫️ Finally, rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. Yet the market appears to be calling out for this. This is high risk territory. Combine this with a treasury yield curve rising above the 0 level and an increasing U.S. unemployment rate and things look increasingly concerning. We can keep any eye on these charts for a lead on what might happen next. I will be reviewing some other charts over coming days around jobless claims and ISM figures to see how positive and negative we are looking. PUKA
FRED:T10Y2Y
by PukaCharts
4
Unemployment, FED Rates, SPXLooks like market bottoms just before the Unemployment peak. Market peaks just before fed starts reducing the rates. At the current situation, we have fed fund rates high and also unemployment started to climb. Will be looking at the unemployment going high and markets roll over and fed cuts rates. if FED keeps the same rate for long, something in the economy will break and they have to reduce the rate and if it happens then it's already too late. Looks like CD's and earning ~5% interest on cash is much better than risking for very limited upside in the market.
FRED:UNRATEShort
by MarathonToMoon
7
$GBINTRS - BoE's Snowball - The Bank of England (BOE) decided to deliver its #inflation medicine in a bigger dose at their recent monetary policy committee meeting. The bank made the shock decision to raise borrowing costs a half percentage point, taking the official rate to 5% ; double the size of the increase anticipated by most economists. BoE hiking interest rates to 5% , it adds further strain to millions of homeowners across the country. The Central Bank Rates was upped by 0.5% from 4.5% previously and remains at it's Highest Level since 2008 Financial Crisis.
ECONOMICS:GBINTR
by Mr_J__fx
Thesis: slightly higher SP500, before crash due to unemployment12/9/2023 I - Issue: Yesterday, the latest unemployment rate for the USA were released. The current rate stands at 3.7, reflecting a decrease of 0.2. The key question now is whether this is merely a test of support or a signal for a potential invalidation of the bottom structure. R - Rule: Since 1950, we observe numerous instances where the unemployment rate proves to be a reliable indicator for determining the macro trend of the stock markets.The formation of a bottom signals a peak for the S&P 500, and the initiation of an upward trend is generally considered the least favorable time to invest in stocks. A - Application: As per the latest data, the unemployment rate stands at 3.7. As evident from the charts, this marks a breached resistance that is now expected to serve as support. Additionally, there is a current rejection of the upper band of the Bull Market Support Band, but the price remains above it, indicating potential support in this range as well. Furthermore, in accordance with the Phillips curve, there is a negative correlation between inflation and unemployment. This relationship suggests that the declining inflation, results in an rising unemployment. C - Conclusion: The lower unemployment rate currently appears to be a retest of the 3.7 level. It is highly likely that it will stay above this level, given the substantial support from the horizontal support and the Bull Market Support Band. Additionally, the Phillips curve provides an additional reason why unemployment may increase in the coming months. This suggests that, based on this scenario, the stock markets could be approaching a potential peak. Take this into consideration.
FRED:UNRATE
by FibonacciTheGreat
$USINTR - A Month of BreathThe Federal Reserve left the target for the Fed Funds Rate ECONOMICS:USINTR unchanged at 5%-5.25%, as expected, but signaled rates may go to 5.6% by Year-End if the Economy and Inflation do not Slow down more. It is the first pause in the tightening campaign following ten consecutive hikes that lifted borrowing costs by 500bps to the highest level since September 2007. Throughout Fed's announcement The Dollar Index TVC:DXY plunged to what can be said Wave C completed from A-B-C Elliot Waves Correction (attached ideas) Have the markets priced in Inflation ECONOMICS:USIRYY and Interest Rates ECONOMICS:USINTR ? TRADE SAFE *** NOTE that this is not Financial Advice ! Please do your own research and consult your Financial Advisor before partaking on any trading activity based solely on this Idea .
ECONOMICS:USINTR
by Mr_J__fx
A Possible Recession Coming: What to Invest in During DifficultChart Analysis: The chart depicts the relationship between the M2 money supply, US Consumer Price Index (CPI), labor market trends, and historical recessions. Key observations include: Recessions: -Historical recessions are marked and correlated with significant economic downturns. -Each recession coincides with substantial drops in the labor market and fluctuations in the M2 money supply and CPI. M2 Money Supply and US CPI: -The M2 money supply (blue line) shows a steady increase over the years, reflecting ongoing monetary expansion. -The US CPI (orange line) follows a similar upward trend, indicating rising consumer prices and inflation. Current Economic Conditions: -The chart suggests a potential recession on the horizon, marked by the recent economic indicators and historical patterns. Bitcoin's Role in the Current Economic System: This is the reason the goverments wants to stop Bitcoin. People want out of their slave system where they create abundance for themselves with money printing while our labor value is always decreasing. Recession Expectations and Market Opportunities: Be open to a recession in the coming winter. The CME is having a meeting today where there is a 5% chance for a 0.25 rate cut and a 95% chance for a cut in September. Historically, there is a two-month window where the market booms and then rolls over into a recession after rate cuts. This supports the idea of a left-translated cycle and a longer multi-year cycle. For more information, see "The Fourth Turning." Investment Opportunities_ With this information, there can be good opportunities to get in early on investments in the precious metal markets like gold and silver, and also mining stocks. Production materials like copper, oil, and steel can be great shorting opportunities in the coming weeks and months. Conclusion: Understanding these economic indicators and historical patterns provides valuable insights for making informed investment decisions. While the future economic landscape looks challenging, strategic investments in precious metals and shorting opportunities in production materials could offer significant returns.
ECONOMICS:USM2Short
by martinxi5u4
2
A look at M2 Money Stock Out of curiosity I took a look M2 to see the trends over the years and how it compares to COVID and the last few years. I don't have any great revelations to share about what to do, but I thought the chart was interesting. I also did some research and used ChatGPT to help me create a summary about M2. Please note that I cannot guarantee the following text is perfectly accurate, I am not a financial expert or advisor, but it is an interesting overview. Enjoy. 1) Introduction: Money Stock Measure 2, or M2, is a comprehensive measure of the money supply that includes various types of financial assets held by the public. It encompasses M1 — which consists of the most liquid forms of money like cash and checking deposits — and adds less liquid forms such as savings deposits, time deposits under $100,000, and retail money market mutual funds. This broader measure provides a more complete picture of the available money within an economy than M1 alone. 2) Why M2 Matters to the Economy and the Stock Market: Monetary Policy Indicator: M2 growth rates can indicate the looseness or tightness of the Federal Reserve's monetary policy. Rapid growth in M2 may suggest a looser policy with potential implications for lower interest rates, while slower growth could indicate a tightening policy stance. Economic Health Predictor: Fluctuations in M2 can signal upcoming changes in economic activity. An expanding M2 typically suggests that more money is flowing into the economy, potentially boosting consumer spending and overall economic growth. However, if this expansion leads to inflation without an accompanying increase in real output, it could be detrimental. Interest Rate Influence: Since M2 impacts interest rates, it indirectly affects the stock market. Lower interest rates from an increased M2 can reduce borrowing costs and stimulate both capital expenditures and consumer spending, which generally supports higher stock prices. Inflation Expectations: Inflation can erode the purchasing power of money. An inflating M2 can lead investors to adjust their expectations, impacting bond yields and stock valuations. 3) As an investor, monitoring M2 can enhance decision-making in several ways: Growth Trends: Observing whether M2 is expanding or contracting can provide clues about future economic conditions and monetary policy directions, helping investors anticipate market movements. Asset Allocation: During periods of M2 expansion (indicative of lower interest rates), investors might favor stocks, particularly in sectors like consumer discretionary that benefit from increased consumer spending. Conversely, a slowdown in M2 growth could be a signal to move towards safer assets like short-term bonds, which are less sensitive to interest rate rises. Sector Impacts: Different sectors react differently to changes in M2. For example, financials might benefit from higher interest rates, while sectors sensitive to consumer spending could gain from an expansionary M2 environment. Inflation Hedge: Rapid increases in M2 that might lead to inflation suggest that investors should consider assets that typically perform well during inflationary periods, such as commodities or real estate. Global Considerations: For those invested internationally, understanding how M2 changes affect global markets and capital flows is crucial, particularly in how developed economies' liquidity influences emerging markets. 4) Conclusion: M2 is a critical economic indicator that offers valuable insights into future monetary policies, economic health, and market directions. It is not a perfect metric on its own, but by integrating M2 data into broader market analyses and considering its implications on different sectors and asset classes, investors can make more informed decisions, optimizing their portfolios to better navigate the complexities of financial markets.
FRED:WM2NS
by Dr_Roboto
Euro-Zone GDP Quarterly *3M (QoQ)ECONOMICS:EUGDPQQ (+0.3 %) Q1/2024 source: EUROSTAT The Eurozone’s economy expanded by 0.3% in the first quarter of 2024, the fastest growth rate since the third quarter of 2022, to beat market expectations of a marginal 0.1% expansion and gain traction following muted readings since the fourth quarter of 2022. The result added leeway for the European Central Bank to refrain from cutting rates to a larger extent this year should inflationary pressures prove to be more stubborn than previously expected. Among the currency bloc’s largest economies, both the German and the French GDPs expanded by 0.2%, while that from Italy grew by 0.3% and that from Spain expanded by 0.7%, all above market estimates. Compared to the same quarter of the previous year ECONOMICS:EUGDPYY , the Eurozone’s GDP grew by 0.4%, beating market expectations of 0.2%, and gaining traction after two straight quarters of 0.1% growth.
ECONOMICS:EUGDPQQ
by Mr_J__fx
$USGDP - Quarterly DataECONOMICS:USGDPQQ (Q3/2023) The American Economy ( ECONOMICS:USGDPQQ ) expanded an annualized 4.9% in the Third Quarter of 2023, slightly below 5.2% in the second estimate, but matching the 4.9% initially reported in the advance estimate. It still marks the strongest growth since Q4 2021. Consumer spending rose less than initially anticipated (3.1% vs 3.6% in the second estimate), but remained the biggest gain since Q4 2021. The slowdown was mainly due to services spending. Also, private inventories added 1.27 pp to growth, below 1.4 pp in the second estimate and both exports (5.4% vs 6%) and imports (4.2% vs 5.2%) increased less than initially anticipated. On the other hand, nonresidential investment was revised higher to show a 1.4% rise (vs 1.3% in the second estimate) as investment in structures surged way more than expected (11.2% vs 6.9%). Both residential investment (6.7% vs 6.2%, the first rise in nearly two years) and government spending (5.8% vs 5.5%) were also revised higher. source: U.S. Bureau of Economic Analysis
ECONOMICS:USGDPQQ
by Mr_J__fx