The Worst Kept Secret on Wall Street – The Recession is Already Here

Sure, there is no defining exactly what a recession is. What AlphaROC does know is Americans are preparing for a slowdown now, and accordingly, so is Wall Street. In an economy where seeing is often believing, the Fed will have a tough time reversing a recession it set in motion.

December 21, 2022

⅔ of Americans believe we are either in a recession or will be in a recession in the next six months. As their consumption is following suit, we are likely past the point of no return. The recession is here- but how steep and for how long?

For now, Jerome Powell’s Fed continues the squeeze with incessant rate hikes, and 6 out of 10 Americans believe more are coming. Purchasing intentions are shifting and consumers are feeling worse than ever. The NBER has a term for that phenomenon: “recession”, or in other words, a significant decline in economic activity that is spread across the country. The rate hike cycle has hit markets particularly hard this year, destroying wealth in a huge way. However, AlphaROC highlights less than ⅓ of Americans invest in the stock market directly, so it takes more than a stock market decline to affect purchase intentions. Our data also reveals over 60% own their homes, but this is not where the story ends. Americans used to count on their homes as a rising investment asset, but an increasing number believe their home value will decline, directly impacting the real wealth effect.

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Sentiment

Americans feeling worse off

While a recession’s definition might be negative GDP, just ask Americans how they feel

Worse Off

Sentiment

The Good, The Bad, and the Tightwads

Americans can’t cover living expenses now; pretty recessionary - regardless of the definition

I do not make enough to cover my living expenses

Wealth Effect

Cheap Home Sweet Home

The wealth effect is not just affecting money managers having a tough year. Expectations of my home’s value in 12 months

I expect it to decrease

Wealth Effect

Personal Balance Sheet

Home values are the real barometer of wealth

Barometer

The Sky is Already Falling

2 out of 3 people believe we are either in a recession or will be over the next six months

Rates

Sir Powell, Main Street is Paying Attention

Where will interest rates be in six months

Purchasing

Home Buyer Hibernation

How likely home buyers are to purchase a home in the next six months

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