Global Stock Market Crash Biggest Since Black Monday in 1987! US Entered Recession Three Months Ago!
Friday's unemployment report triggered a global stock landslide as the final straw that broke the backs of world markets!
So much hinged on a single jobs report as the final trigger. Well, a few employment reports arrived like machine-gun fire in one week, and changed the battle, but the latest labor report on Friday, minute as the change was, turned out to be a rocket-powered grenade!
Seeking Alpha says the following about the resulting market tumult this morning:
Thought last week was bad? Think again. There's some serious carnage out there, and the fallout is quickly spreading across the globe…. A disappointing jobs report on Friday indicated that Powell and Co. should have likely cut rates at their July gathering last week, and sentiment has quickly shifted from a soft to a hard landing- or even an emergency landing.
And there it is—confirmation of the seemingly (to nearly everyone) outlandish claim I’ve been making for months: The Fed would be caught waiting too long to cut rates because of labor metrics that were badly broken by Covid lockdowns and Covid/vaccine illnesses, so we would end up deep in recession before the Fed makes any changes.
The grenade that went off was an unemployment report that triggered the Sahm Rule that I’ve been warning was just about to blow. And now it did, and markets all over the world are running for cover from a US economic collapse.
Economists say the worrying state of the economy now means the Federal Reserve must cut interest rates much more quickly than planned to avoid a huge recession.
Too late for that!
Since the Sahm Rule fully triggered on Friday, as I wrote about in my Deeper Dive in a section available to everyone, I’ve posted at the top of the headlines section (available for free to all readers again today) an interview with Claudia Sahm that was recorded just before the the rule was triggered by rising unemployment on Friday. She explains the exact intricacies of how the rule works and just how precisely accurate it is, tested over the full history of data available. Here is the main takeaway, and it’s big:
What the rule actually says, according to Sahm herself, is that, as soon as we arrive at the benchmark (that we crossed on Friday), it always means we have ALREADY BEEN IN RECESSION FOR THREE MONTHS! So, there you have it—full confirmation from the most reliable recession timer we have—that we have been in a stealth recession (i.e., one not shown yet in GDP) during the months I have been making that exact claim as a lone voice against what “real” GDP was showing.
(Note that the interview with Claudia Sahm was recorded just before we crossed that Maginot Line of the Sahm Rule and with no knowledge that we would cross that level in Friday’s labor report. Because of how precise the rule is in its metrics that had not, at that point, been crossed, Claudia Sahm said she was not, at that point, concerned because we have gotten very close to that point in the past then faded away. However, we just cruised past being close and right through that mile marker and did not fade away … right after the interview. So, we’re there now!)
Sahm also states that the timer is more reliable than GDP where I also stood my ground with few or none joining me by saying recession was here, regardless of what GDP claims about the economy. She explains the political reasons for that as well as the extreme precision of the rule compared to ham-fisted GDP metrics. (And she’s a Fed economist.)
What I want to point out today is the huge cascade of market-shattering headlines and recession headlines that has immediately ensued. (You’ll see a good sampling in the closing section.)
Even The Wall Street Journal is coming alongside me today by finally saying the Fed MUST now “reckon with hard landing.” Yes, it must. I’ve written many articles scoffing at the notion that the Fed was in a Goldilocks scenario that was about to deliver a soft landing by arguing that the Fed’s soft landing would look like this:
Inverted. It’s what happens when you suffer from vertigo land in a fog.
It’s all here today, enwrapped in a massive global stock sell-off that reached historic limits in Japan this morning, triggering circuit breakers to shut panicked markets down. The Dow in its early-morning futures was down by 1200 points in alarmed response. It attempted a recovery from that abysmal start all day, but still ended over a thousand points down (-2.6%). The S&P ended down a whopping 3%, and the Nasdaq did a nose-cone landing into the ground at -3.4%.
Wall Street’s fear gauge launched into a massive sky-busting rocket ride this morning, nearly reaching all-time record highs, and US bond yields have plunged off a recessionary cliff for more than a week as have global oil prices now that many are waking up to see THE RECESSION IS HERE!
Bond yields spiked up and down 20 basis points twice today (massive flips by bond standards), and the yield curve for 2YR bonds v 10YR bonds finally reverted back to normal for a flash mid-day. (Reversion being the true sign of recession that pulls the trigger, not the initial inversion that merely cocks the gun.) Everything is joining the statistics parade at the last second.
So, yes, suddenly everyone is screaming “recession” when just three days ago they were all glibly talking “Goldilocks” and “the soft landing is here.” It’s all over the news today. Now they’ll all act like “No one could have seen this coming,” even though I have strained my voice for months to say this is exactly where we’d end up! Many even argued that High-Tech AI stocks were virtually crash proof when I kept saying they’d lead the crash exactly like high-tech did in 2000.
“Oh but 2000 was so much different,” they claimed.
“NO,” I would rebut, “And what is EVEN LESS DIFFERENT than 2000 is how you are now claiming the high-tech leaders cannot crash because they are the companies that will rule the future. In the run-up to 2000, those were exactly the kinds of companies that led the crash as we looked toward the huge shift to an internet-based future economy, which we did get, and it still took those companies TEN YEARS to fully recover from the crash! Present claims were exactly the same looney claims made by the irrationally exuberant back then! You’re copycats!” Eventually, yes, some of those companies led the future, of course; but not until after a huge crash; and, of course, some of them did not survive the LONG crash that came after 2000.
These people never learn a thing, arrogantly thinking we’re immune to such crashes even as they repeat the exact euphoric errors that set up the historic 2000 dot-com bust!
So, déjà vu!
Heck, the Magnificent 7 had already fallen more than $2-trillion by the end of Friday! What bigger sign did they need! Now, at the end of today, those seven stocks are down $3-trillion! Maybe that’ll teach ‘em.
Déjà vu all over again!
Heck, Nvidia is down so deep in its own bear market already—now down 35% from its previous nose-bleed summit earlier this year—that it is making Cisco’s plunge in 2000 look like an amateur run. So that was fun! AI stocks overall are fell below their 200-day moving average today.
The sell-off is a blow to Americans retirement savings since 401(K)s are heavily invested in stocks.
Not mine. I already moved ALL of our 401K money out of stocks and into cash and particularly US Treasuries, as falling Treasury bond rates at this juncture mean rising values for existing bonds that have higher yields. I wanted to be in those bonds before their values started to rise and before stocks fell. (I hope readers here paid attention to the risks I’ve laid out and did whatever was right for their own holdings, and you can send tips for the free-to-cheap guidance you got anytime you want ; )
Listen to how full-on, the mainstream media (MSN as quoted in The Daily Mail) suddenly takes the recession they never believed in to be now:
But the gloomy news does mean that the Federal Reserve will have to cut interest rates in September by a bigger margin than planned, and maybe several times again before the end of the year….
Job growth in the US badly missed expectations in July and the unemployment rate jumped to the highest rate in almost three years….
Many investors think the central bank should have made the move on Wednesday.
The market is now 'wondering if the Fed is too late in transitioning monetary policy,' Quincy Krosby, chief global strategist at LPL Financial told CNBC.
All right when GDP tried to make a liar out of me after I claimed the recession had already begun. I’ve said for many months we’ll wind up deep in recession that was already beginning before the Fed finally makes its first rate cut—a recession made deeper by the Fed’s delay as it would be forced to keep fighting the inflation it created and, so, would be late to change its policy rate due to its broken (as in slow to report in) labor metrics. Unsurprisingly, then, people are today already howling for emergency rate cuts due to labor metrics that finally showed up all in one week to do their job!
As well as the huge drop in Japan, stock markets were battered in Europe. The pan-European Stoxx 600 index dropped 1.7 percent to a three-month low, Germany's DAX shed 1.5 percent, while the CAC 40 slipped 1 percent . In London, the FTSE 100 fell 0.6 percent.
The declines followed Thursday's retreat on Wall Street after weak manufacturing data raised worries the Federal Reserve may have waited too long to cut interest rates, raising risks of a recession.
Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Asset Management, said: 'I didn't expect stocks to fall this much.
'This is probably because there are concerns that the US economy will collapse in a big way, which is the most unpleasant pattern for Japanese stocks.'
José Torres, a senior economist at Interactive Brokers, said: 'The short-lived satisfaction of Fed Chief Powell communicating decent odds of a September rate cut has turned sour as investors are now panicking that the central bank isn’t trimming soon enough.'
It’s ALL in the news now!
I did a GoldSeek Radio Nugget interview with Chris Waltzek on Saturday, and we talked about this sudden critical juncture the US just hit. I had hoped to place a link here because everything Chris and I talked about is complemented by what Claudia Sahm says in her interview in the headlines section below, and our GoldSeek interview was entirely validated in its Saturday claims by today’s global market news. The interview is not yet available, though, so I’ll have to post it in a later edition and add it here when it is available. (Wednesday update: here is the link to the interview as I promised I’d come back to add.)
Economania (national & global economic collapse plus market news)
(Claudia Sahm explains her rule to Adam Taggart: Says we will have BEEN in recession for three months as soon as the Sahm Rule is triggered as it just was after this interview was posted.)
Stocks tumble as global market sell-off intensifies... Developing... DOW futures started down 1200
Japan’s Nikkei logs worst day since 1987 Black Monday crash (-12%)
NIKKEI Biggest Rout Since 1987’s Black Monday!
Japanese stocks have 2nd worst day in history… More liquidations are at lining up…
Grim Milestones Flash Across Asian Stocks as Risk-Off Deepens. “Circuit Breakers” Kick in.
Global stock market meltdown as fears grow US economy will 'collapse'
Seeking Alpha: Selloff rocks the globe as markets start the week in panic mode
Investors are unwinding the biggest ‘carry trade’ the world has ever seen, SocGen strategist says
"Suddenly Recession Is on the Tip of Everyone's Tongue... Wow, Did That Happen Fast!"
Lousy Jobs Report Forces Fed to Reckon with Hard Landing (WSJ Headline says enough.)
Treasuries Surge as Traders Bet on Emergency Fed Rate Cut
US yields slide as traders bet on big Fed rate cuts after weak data
Warren Buffett raises Berkshire cash level to record $277 billion after slashing stock holdings
SoftBank shares tank near 19%, wiping off $4.6 billion from founder Masayoshi Son’s fortune
Money Matters (monetary policy, metals, cryptos, currency wars & CBDCs)
The Fed is trying to ‘fight a ghost’ as recession fears mount, investor says: “The Federal Reserve may have little room for manoeuvre.” (Dimwit claims Fed did not create this problem caused by fiscal stimulus, but that is obtuse since the Fed rushed in like an Olympic sprinter to fund it with EVERYTHING the government wanted.)
Libero Copper: What is $30 Billion of Copper and Moly Really Worth?
Inflation Factors (due to too much money chasing too few goods)
U.S. crude oil falls below $73 per barrel, hits six-month low as market sells off on recession fears
Wars & Rumors of War, Revolts, Hacks & Cyberattacks (+ AI threats)
Iran plans to attack Israel on the Jewish day of disasters
Iran expected to attack Israel as early as Monday, US officials arrive in Middle East
Iran Warns Pilots to Avoid Airspace as Middle East Awaits Attack
Biden heading to Situation Room as Iran threatens attack on Israel
Jittery Israel Braces For 'Five Front' War As Officials Predict Iran To Attack Monday
Travellers rush to leave Lebanon amid spiking tensions, cancelled flights
Fears of Middle East war grow after Hamas leader's killing
Israel-Iran Conflict -- Political and Military Leaders All Moved to Bunker
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Starmer Calls Emergency Meeting After Riots Flare Across UK
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Chinese-made humanoid robots raise alarms in Congress: ‘Stealth army on our land’
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Humiliated and furious, Maduro locks down 2,000 Venezuelans in fiercest crackdown of his rule
Political Pandemonium & Social Senescence (socio-political issues & events)
Trump Rages If He Doesn’t See Kamala Harris In Fox Debate He ‘Won’t See Her At All!’
Olympics chief slams ‘unacceptable’ hate speech against boxers in gender row
A Battle Over a Farm, a Mosque and the Moral High Ground
A Pox Upon Us (the plagues, pandemics & health police of the 2020s)
Will I Ever Learn? (And will THEY? Especially listen to the embedded video of Naomi Wolf.)
WHO chief mulls calling emergency committee on mpox
Calamity, Catastrophe & Climate Craziness
World’s largest iceberg spins in the ocean, refusing to melt (Won’t cooperate with global warming? Well, it’s stuck in limbo for now.)
Off-the-Beat News & Just Plain Offbeat News
It's Sounding Like Boeing's Starliner May Have Completely Failed
I watched the Sahm interview, thanks for sending us the link - it was fascinating. They do a good job in the interview discussing a potential rate cut impact post Sahm rule trigger. Powell is in such a pickle, if he cuts rates today he’ll just undone any work done on inflation. What a mess.
So, the Fed will now be forced to drop rates, maybe even more than 25 basis points. Maybe they will freak out and drop twice more before the end of the year. The government will likely start bailing out the "too big to fail" companies. Then, inflation will rise when rates are cheap, money is distributed to poorly run large corporations, and government spending increases to ever more unsustainable levels. Speculation in housing will continue, and the entire mess will start over again.
I believe the Fed rate should stay where it is, and the economy should be left to work itself out. And government spending should be curtailed. Of course, none of that will happen. Rinse and repeat. Inflation may have slowed, but the elevated prices of the last cycle are still there. Most in the mainstream media act like 3% inflation is "good" and that inflation isn't an issue. But those elevated prices aren't going away, and lower rates, government spending, and all of the measures taken to minimize the recession's impact will lead to another big spike in inflation before long.
What a mess.