1. Opposed to the Consensus

The Federal Reserve Bank of Philadelphia recently polled 37 economists/forecasters documenting a change in their views for the next three quarters. Among their rosier forecasts, they predict the headline CPI to average 3.1% in 2023, down from 3.4%. The average 10-year '23 to '32 CPI is projected to be 2.4%, and the average 10-year PCE is expected to be 2.2%. They anticipate that unemployment will stay at 3.6% in calendar year '23 and increase to 4% in calendar year '24. Monthly hirings are predicted to remain positive, averaging 288,600 in '23 and 94,800 in '24. The equity markets have responded positively and are referring to the last two weeks as an expected correction. Is this a realistic conclusion?

When the M2 money supply shows a contraction of over 4% for the fourth consecutive month (for the first time this century), after experiencing increases of over 27% in '21 (for the first time in our history), what should we think? Does this extreme government intervention expand our welfare or threaten it? With the Fed's balance sheet on 8/17 having declined to less than $8.2 trillion over the last year from a high of $8.95 trillion, when it was $800 billion in 2008, what does that signify? Are people aware of how the government has impacted our social and economic reality this century through unsustainable borrowing and printing?

Why is the ten-year government bond resistant to going below 4%? Is it headed upwards in a weakening economy? If so, why? If labor productivity remains at around 1% and the cost of labor continues at last month’s growth rate of 4.8%, how can inflation decline? If the August CPI is announced on September 13 and shows an unexpected increase of 0.5% to 0.7%, and the Fed announces a quarter-point increase in Fed Funds on September 20th, will the 37 economists change their forecasts?

Do these realities align with a 20 price to earnings multiple for NASDAQ and the S&P? No.

Have a blessed week!

By Tony Christ