are we F’d

well Bank of America just released their

six scenarios for what's going to happen

with this economy and unfortunately Bank

of America starts with we remain

concerned that markets are too

optimistic on what it will take to bring

inflation down not great in this video

we are going to discuss these six

different scenarios Bank of America

believes could play out when it comes to

recession or not

so the first scenario is the no Landing

scenario they believe this is likely to

be unsustainable they indicate that

headline inflation has come down and

while the economy has been resilient and

labor market has been stretched uh which

which would be even better than the

consensus estimate that basically the

economy just keeps going that we just

don't land the plane so to speak it's

just the economy just keeps going

everybody continue spending money and

everything's fine and it's even more

optimistic than the soft Landing is what

Bank of America argues here it's

consistent with the argument that

inflation was transitory after falling

on its own and unfortunately as much as

this would be fantastic that the economy

keeps going inflation goes away and we

don't go into our session Bank of

America believes that this is not

sustainable they essentially argue that

the easy part of disinflation is over

and instead now we have to deal with

that sticky core inflation that's going

to keep pressure on from the fed and

basically makes the no Landing scenario

in their opinion unsustainable

now it's all a matter of time in their

view they argue they say market pricing

of rate cuts by early next year would

actually be wrong in a no Landing

scenario the longer it takes to land the

longer rates are higher so in other

words the longer or we we have these

this strong economy and strong reports

the more the FED says all right I guess

we don't have to cut anytime soon

now that is interesting because they do

argue in this that Services inflation

has been sticky but then in the same

segment they also say quote however

Services have now started to weaken and

they use that to argue that GDP is

slowing down

well that would then also imply that

potentially core Services inflation

would go down right

yes B of A probably didn't tie those two

together but this is the scenario that

Bank of America says is not likely

but could potentially be seen as the

best scenario because again it's better

than the soft Landing the economy just

keeps firing and inflation goes away

slowly

soft Landing is the consensus estimate

of Wall Street and this is the idea that

the soft Landing is about six months

away although frankly the soft Landing

has been deemed to be six months away

for like the last 18 months and the idea

is that in a soft Landing scenario

inflation comes down without needing to

destroy the economy substantially

uh and without needing to raise interest

rates any further data so far has

unfortunately though been consistent

with a no Landing scenario that's not

sustainable not with a soft Landing in

other words we're getting stronger sales

reports stronger GDP reports stronger

labor reports than would be consistent

with some form of soft Landing so this

is your consensus estimate right now now

what's next well now you get Bank of

America's Baseline estimate and then

we'll get into some of the worst

scenarios as well I just want to point

out here uh Joel just uh wrote a comment

I just bought my fifth course last night

renovation and Property Management love

it had to pause to catch up on the live

stream thanks Kevin thanks man for

saying that that's awesome yeah check it

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of course so what do we have with the

hard Landing which is the Bank of

America scenario

so with the Bank of America scenario

quote excuse me we've consistently been

expecting to take about six months to a

year longer than the consensus for

central banks to bring inflation down to

Target and start cutting rates in other

words this is your over Titan scenario

where basically to get core inflation

down they need to keep rates higher for

longer and that ends up crushing

employment and you end up getting

negative payroll reads and you end up in

a substantially worse economy than where

we are now

in other words they don't expect

inflation to come down it's going to

keep being sticky and that is going to

force a hard Landing style recession

where you do get that unemployment rate

popping up a percent and then

historically once you pop up a percent

you're gonna pop up another percent so

all of a sudden we go to five and a half

to six percent unemployment which

honestly is still not that bad compared

to the 8 9 10 11 unemployment we had

during the Great Recession or or you

know other during other recessions not

considering covet all right then you

have hard Landing scenario number two so

hard Landing scenario number one is just

an unemployment recession hard Landing

number two which is scenario number four

here is Something's Gonna Break

uh

that would not be great uh there's an

increasing risk that something may break

so far nothing has broken however

something can still break as argued

recently the interest rate the interest

rate needs to be high enough to bring

inflation to Target it's going to take

longer and in this higher for longer

scenario you end up getting something

breaking

wouldn't be great

uh this would be like more of a severe

banking crisis right

number five is deemed to be the worst

case scenario the worst case scenario is

stagflation

not as likely as one may think but it is

a concern it is likely at least for a

few months once the economy starts to

weaken in other words the economy

weakens but you still have high

inflation now you're in stagflation this

is a less likely a scenario but it is

still possible

uh imagine a few months of rising

unemployment or sticky even Rising

inflation

it will take some time for a weakening

labor market to actually bring inflation

down I put a little sad face here

this scenario is the most negative for

risk and most positive for the US dollar

central banks will have to stick with

high rates despite a weakening economy

the longer this goes the higher the risk

something breaking and stagflation

continuing as something breaks haha typo

anyway

then you have scenario number six which

is a central bank blink

okay that is a little bit of a tongue

twister Central Bank blinking so the

Central Bank blinking is basically

delaying the landing of the economy

which ends up making the recession risks

worse in the longer term per Bank of

America this is basically where you cut

rates too early because you get spooked

by something and when you cut rates too

early and you get spooked you end up

having the FED temporarily call a

victory that is there they run a Victory

lap but then you end up inducing

inflation again and you have to go right

back to raising rates which could lead

to a worse hard Landing so these are the

six scenarios that Bank of America

believes are likely catalysts here uh

specifically their concern is that

inflation will stay stickier for longer

and by staying stickier for longer

you're increasing the odds of a hard

Landing which is their Baseline forecast

the Goldilocks scenarios are really that

you end up with either a soft Landing or

a no Landing which is basically the

economy just keeps booming

personally again I don't think today's

employment report was great I I think

you know it was much better when we had

job gains than losses well we didn't

have losses we still had job gains but

uh we I would have rather us beat on the

number of people getting jobs and gotten

a lower read on the wage gains but

instead we got a higher read on the wage

gains a revision up on wage gains for

the prior abort and a revision down on

prior employment and then obviously a

Miss on this employment to me that's not

fantastic that's the opposite of what

you want you want softer wage gains

still wage gains though people can still

earn more money but softer levels with

more people having jobs uh so so

personally I think we got the the worst

of both scenarios but uh you know we'll

see some people didn't want a hot jobs

report

anyway these are the six scenarios

curious to know what you think so make

sure you leave me a comment to let me

know which scenario you think that we

are in at this time now I want you to

know this when it comes to AI time is

what's going to make you money and if

you can prove that value to an employer

you'll always be able to be employed so

this is another way of making sure that

you don't get replaced but