GFC vs. 2023
It seems contraction in the U.S. economy is starting to appear. However, a recession is not scheduled for the time being. Comparing previous eras and recessions might fit human psychology, but it will undoubtedly be different. But most likely, the Federal Reserve will continue to hike rates until something materially breaks.
We have had a banking crisis, which is fundamentally different from 2008. In 2008, we had mortgage defaults and saw a knock-on effect with house prices falling drastically. At the same time, banks had deep losses on loans on their balance sheets. SVB was fundamentally different as depositors panicked about severe unrealized losses on their treasury portfolio.
OPEC +
To start the week, we had OPEC + announcement of cutting over 1m barrels/day starting next month, while 2m barrels/day are being cut from October. CryptoSlate analyzed the repercussions of these cuts; not only is this pure signal of demand collapsing. It also left the Biden administration in trouble after drawing down on the Strategic Petroleum Reserve while failing to build on the reserves when prices were surpassed. Crude Oil WTI (NYM $/bbl) closed the week at $80/ barrel while it was as low as $67, with some analysts expecting triple digits.
U.S. manufacturing slumps
The March ISM manufacturing survey continued its decline, staying within the contraction zone of 46.3, undershooting expectations. In addition, JOLTS data printed 9.93 million vs. the 10.
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Author: James Van Straten
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