Black swans surfing in Australia. A "black swan" event is a highly unlikely, yet high impact event. An example would be a small meteorite hitting your car. There is a tiny, tiny chance of your car ever being hit by a small meteorite. But if one did hit your car out in the driveway, it would have a huge effect, like destroying your car. That's an example of a black swan event, a term made popular by the 2007 book Black Swan by Nichols Taleb.
The 2023 recession that hasn't happened yet is now often called the most anticipated recession in history. This is due in large part to the rise of YouTube and social media since the Great Recession of 2007-2009. there are just a lot more people talking about the recession that many people believe we are heading into. Personally, I've been writing about this recession since early 2019, here's one of the earlier posts.
The question at this point is how bad of a recession, and when does it really get going? Personally, I think we are hitting the point where the massive tightening of credit by banks (after the March 2023 bank failures), and the lag effect of the steepest interest rate hikes in modern history here in the U.S. are bringing the "real world" or "Main Street" economy to a screeching halt as we speak. Residential real estate sales have dropped off a cliff, home values are down 10% or more in several recent boom cities (San Francisco, Austin, Phoenix, Las Vegas, Boise), and Disney World in Florida was so slow on 4th of July weekend this year that it made national news. Most consumers near the end of any excess savings they had, and credit card use is soaring.
My personal view is that the next stock crash will happen between now and late September 2023, looking that the slowing momentum of so many aspects of the economy. I think crypto and gold will initially drop as well. I believe there will be a domino effect at that point, with whole bunch more bank collapses coming as well. The Fed's own report, from late May 2023, says 722 U.S. banks are in danger of bankruptcy. Yet The Fed seems to be ignoring that, and expectations are they will raise interest rates yet another 1/4 point (.25%) in late July. So that's my personal take on things on the immediate economic outlook.
OK, I'm a homeless guy who has no money invested, so it's easy to blow off my opinion. I have made several pretty solid calls in the past. If you don't like my take on things, check out some of the links at the bottom of this post. I, personally, think it's time to get out of stocks, and wait out the chaos, by getting into whatever people think is safer for the next 6-12 months. That may be short term U.S. treasuries, gold or silver bullion, or major cryptos (Bitcoin & Ethereum, perhaps the next few top coins). That's a personal choice for all of you reading this.
Most older investors like gold or treasuries, while the rising Millennial and Gen Z crowd are far more into crypto than gold, in general. I think we are about to head into 9-12 really tough months economically, but with low inflation or even short term deflation ( as shown by CPI), which will lead to more massive bailouts for banking and financial markets, but not everyday for everyday Americans.
That will lead to The Fed lowering interest rates, possible in late 2023 and throughout much of 2024. So we have an economic crash soon, slowing down most all businesses, as inflation fades out of the story. But by summer of 2024, we should have lower interest rates, and tons of money being created and surged into the banking system, corporate bonds, and the stock market. So we will most likely see a really slow Main Street economy and a new rally beginning in stocks, and in crypto, by mid 2024. All that money creation will begin to pump up inflation again, with it rising back up in late 2024 and early 2025. That's the most likely scenario I see going forward. Residential real estate will keep tanking for another couple of years in most places, and the Main Street recession will linger for a couple years or more, in most places, because the whole world is slowing down right now.
But I'm just a broke futurist geek, not a well known investor or macro-economic forecaster. In any case, we appear to be sliding into the major recession I've been blogging about for about 4 years now. In my opinion, this recession will be life changing for many people, and world changing on several levels. Time will tell on all of that.
But why take my word for it, here are some much more respectable people voicing their opinions.
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