Editor’s ChoiceThe US economy is much worse than you thought

The US economy is much worse than you thought

The u.s economy is in much worse shape than we previously thought. The bureau of economic analysis just revised the q1 US GDP data and it is not looking good. Previously it was reported that the US economy shrank about 1.4% on an annualized basis in q1. 

But all of a sudden that revision is showing at least a 1.6% contraction in the US GDP data from q1. That means that the US economy is doing even worse than they previously told us.

If we go ahead and look at the actual charts we can see that the US economy hasn’t done this bad since literally the start of the covet pandemic back in 2020. As you can see here q1 there was an economic contraction q2 there was a massive economic contraction.

Two straight quarters of economic contraction means it was a recession. Of course, the economy came roaring back once the government and the central bank stepped in with all sorts of monetary and fiscal policy and stimulus.

Now that we got that economic contraction in q1 of this year all lies are on q2 data. If we get an economic contraction in q2 that’ll be two consecutive quarters and it’ll mean that we’re in a recession.

Now whether the q2 data actually is negative or not there are many people who feel like we’re in a recession regardless of the actual definition. What that means is that the psychology of consumers is changing the psychology of investors and consumers are worth paying attention to. 

Because ultimately that psychology will eventually show up in the data in the future. This data like the US GDP data is actually backward-looking it tells us what already happened. But as we’ve seen the federal reserve they’ve made its intentions very clear. They believe that assets and inflation have gotten too high and that they are going to destroy demand.

If they are successful in destroying demand the hope is that inflation will come down but in order to bring inflation down and destroy demand it means that we’re gonna have some sort of contraction and so the psychology now is people are preparing for a recession. 

In some way, we actually may manifest a recession because of the feds telling us that they’re gonna destroy demand. What does everyone do they start hoarding cash they stop spending as much and they stop investing as much.

That’s where you see asset prices coming down that’s where you see inflation hopefully will start to come down. But it means that a recession is on the horizon and if they cannot actually find the soft landing which I don’t believe that they will.

It’ll mean that we went from the covid 19 pandemic to historic inflation all the way to a recession. A nice little round trip in about two into two and a half years. It’s not exactly the economic stability that consumers or investors want in an economy.

We got a lot of work to do and keep your eye on that q2 data. If it’s negative it’ll mean that we’re in an official recession if it’s not it just means that that psychology is likely to play out in the data q3 q4 and into 2023.

There is a massive complex machine at play here and what we are watching is not only a bad situation play out but we’re also watching the intervention and manipulation of the economy. 

Because the central bank and elected officials have to have some need to feel in control and the only way they can do it is to step in and try to destroy demand in these moments. 

I don’t know what’s going to happen but this feels very uneasy and uncertain and I think that’s what you’re seeing play out with consumers and investors alike. They want the cash they don’t want to get overextended they’re going risk-off and that likely is gonna show in the US GDP data at some point.

Read: Bear market will last It’s not cheap yet: Mark Cuban.

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