No Recession

Good Morning Ladies and Gentlemen

„Imagination is more important than knowledge. For knowledge is limited to all we know and understand, imagination embraces the entire world, and all there ever will be to know and understand.“

 Albert Einstein

Last „Stefan’s Weekly“

In my last „Stefan’s Weekly“, I claimed that any environment with economic growth exceeding current inflation, i.e. real economic growth, could be described as a goldilocks environment for financial markets. To me, it seems some market participants anticipate goldilocks rather than a recession, at least for some time.

U.S. inflation

Due to base effects, inflation in the USA rises slightly. However, this should not be overinterpreted after the overall inflation rate had declined significantly in the previous months. I believe that developments at the preliminary stages give reason to hope that the downward trend will continue in the coming months. This also applies to core inflation, where the previous month’s increase of 0.2% probably does not pressure the U.S. Fed to further raise interest rates. Since the numbers came in just below expectations, they should rather ensure that interest rate expectations remain subdued for the time being, especially as initial jobless claims, published simultaneously, rose more strongly than expected.

U.S. third-quarter economic growth

The GDPNow forecast for the third quarter of 2023 showed real U.S. growth of 4.1%. In contrast, analysts‘ consensus forecast stood at a meagre 0.9%. I would call this a significant discrepancy, showing how negatively inspired most analysts still are. If we recall my last „Stefan’s Weekly“, a goldilocks environment asks for real growth, and this, Ladies and Gentlemen, it seems is where we are. Any further economic growth and/or falling inflation rate would further influence real growth positively and thus may lead to a prolonged goldilocks environment. In addition, Ladies and Gentlemen, U.S. consumer spending has recently remained high.

Minor concern

I believe a possible cause for concern is the increase in inventories. Because inventories have also risen, not dramatically, but still, and let us face it increased inventories could lead to production cuts over time and this of course, would not be positive.

Your point of view

Ladies and Gentlemen, please share your opinion with me, but please remember (instead of hitting the reply button) to send your messages to: smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day and a wonderful weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li