They’re right. It is different this time.
It’s worse. Much, much worse. What is? Everything, in terms of preparedness for the next U.S. recession.
Debt is higher than ever, be it corporate debt, government debt or global central banks’ balance sheets. Limited ammunition to deal with a new recession, wealth inequality, the social divisions and political extremes, and now trillion-dollar deficits — everything points to a more fragile system. On paper, low interest rates keep it all afloat, but the context is as ugly as it gets.
Here we are, with the great collapse unfolding in front of us. With Wednesday’s Federal Open Market Committee statement, we continued to witness an utter capitulation to market realities that are forcing central banks to commence new easing cycles. No, this is not a temporary rate-cut event they are promising; it’s a new cycle. The Federal Reserve offered a three-rate-cut outlook, which is precisely what markets had been pricing in. The Fed is bowing before market demands. Give us drugs. Yes, whatever you want, you got it.
Read: Dividend stocks, hot this year, may get even hotter thanks to the Federal Reserve
The response: An overnight collapse in yields on 10-year U.S. Treasury notes TMUBMUSD10Y, +0.00% to below 2%, the lowest reading since the U.S. presidential election in 2016.