Macro Observations

As we head towards the home stretch of 2023, I maintain my belief that two events are more likely than not to occur that will drag the economy into recession. If this is a sign of the early stages of a housing market breakdown, there’s not much of a safety net in place that could mitigate the impact. If the demand for housing is already in decline, it could be much worse 6 months from now.

One thing that a lot of investors count on around this time of year is a year-end rally in stocks. While there’s really no fundamental or economic basis for this to occur, it does tend to play out when you look at the numbers. Seasonality might not matter a bit this time around.

When I talk about the catalysts for a credit event, this is exactly what I’m talking about. Not just trouble, but potentially major trouble. Bank of America was warning of a potential trucking recession back in the 1st half of 2022. If we look at inferred freight rates, which essentially compare shipping expenditures to shipping volumes, this would be the worst shipping environment in at least three decades.