I think a great deal of this situation is narrative based. People are generally terrible at predicting earnings six months out as well as recessions and if we get a major recession it would easily be the most widely anticipated recession in history.

First it starts with higher than expected CPI followed by hawkish fed policy. People learned their lesson last cycle and became worried that rate hikes as in past cycles would cause a deep recession and began adjusting immediately rather than wait for a recession. This is evidenced by the fact that the S&P peaked about four months before the Fed even hiked one time.

That’s a very important point that I think many overlook. When you are completely ignorant of impending danger you are most susceptible to damage. When you’re terrified of getting punched in the face you’re going to take drastic measures to protect yourself and in the process likely not get punched at all.

Meanwhile rates have moved very little in 3 months indicating (to me at least) that the bond market believes rate hikes are ending very soon.

When the fed commits to hiking rates to slow the economy, it almost always leads to recession. You'd have to be a hyper optimist to not plan for a recession, as an individual, or a business.

https://www.politico.com/news/2022/03/29/federal-reserve-rec...

They have very little credibility currently because of past miscues beginning in 2018. The fed has to talk tough because if they were to say “we probably aren’t going to hike much more” markets would likely rebound, easing liquidity and making their job of reducing inflation harder if not impossible.

The problem is that it seems the bond market sees through this and isn’t buying the tough talk. I think most people believe the fed and buy into the popular narrative that taking rates from zero to 4.5% will decimate the economy (even though 4% is actually very normal historically and anything under 4 was considered quite low).

Watch what happens with fed policy if CPI comes in well beneath expectations next Thursday.

Going from zero to 4% is a lot harder that going from 8% to 4%

> They have very little credibility currently because of past miscues beginning in 2018.

Citation for above: https://twitter.com/NorthmanTrader/status/161072868776647475...

Exactly and this is because unofficial fed policy is to follow the popular narrative. When it shifts to they have to stop hiking believe me, they will stop hiking.

A lot of recessions are relatively short, and don't affect big tech companies much in the long run: https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...

Someone tell Apple there was a "Great Recession". A little thing called iPhone made that irrelevant for them.

I started my career during the Great Recession. Wasn't a problem for me. A recession is an aggregate, but during every economic condition there are both losers and winners. You don't want to overreact to every shift in the wind.