E21 - When the Market Is Talking Recession, History Says They’re Wrong

Jordi Visser

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The situation in Ukraine is abhorrent. As commodities continue their volatile ride higher, well-known and revered market participants are warning of an impending recession, or worse, and then there is the Fed. The Fed has gotten hyper-hawkish in a hurry with talk of multiple 50-basis point hikes on the table. If you combine these points, it is easy to understand why so many market participants have become so bearish. Weiss's Jordi Visser sees things differently. He thinks we will likely hit all-time highs for the S&P this year.

 

 

The pessimism is amped up. Everything you read would suggest we are in a bear market and on the verge of World War III. However, with respect to the former, Jordi contends we are in a bull market based on the data he is looking at. As it relates to the latter, Jordi suggests that when WWIII is a highly searched trend, it’s not the time to be bearish.

With many worried that Putin is committed to pressing forward, it begs the question as to whether the headlines and images are weighing on people's sentiment. Jordi asserts that eventually, investors will become desensitized to the images and headlines, and instead revert to the data which asserts a recession is not imminent this year. While acknowledging that he’s not a war expert, Jordi finds it hard to believe the World War III narrative when Russia is expending so much energy in Ukraine alone.

In response to those worried about an impending recession, Jordi refers to the facts–he weighs the current environment of higher nominal GDP, higher inflation, and the Federal Reserve’s reaction. His main point is that with the Fed so far behind the curve from an inflation perspective, they simply cannot slow the economy down by moving at their current or forecasted tightening pace.

To conclude the conversation, G3 and Jordi discuss how investors should manage their emotions in these volatile times.

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