Taps Coogan – May 16th, 2023

Evercore ISI Chairman Ed Hyman, one of the fathers of modern market research and perennially ranked as one of the top institutional economic advisors in the world, recently spoke with Bloomberg about his view that the US will be in recession by Summer:

Some excerpts from Ed Hyman:

“I’ve never predicted a recession this far in advance, so this could be the end of my career. But, early on I became a follower of Milton Friedman and the money supply. The money supply is now contracting and it’s associated with the banking crisis… and somewhere along the line I picked up the yield curve and, as you know, it’s significantly inverted and then, as a follow up on the policy, you have QT as a third item. There is no history… analyzing it, but I’ve also found that if we’re tightening (the Fed) and other central banks are not tightening, it’s not so bad, but if we’re tightening and other central banks are tightening, it makes our tightening much more aggressive on the economy. So, you have all those (factors) at work and they take about a year and a half to impact… The economy right now is very strong, it’s amazing, but I am patient and by the Summer I think we’ll start to see a recession unfold.”

“I don’t think (the Fed needs to keep rates high)… I’ve been through a lot of these things and the lags are real… and it feels to me that the Fed gets a number and they say ‘We have to adjust for that number.’ I’m saying ‘no.’ It takes a year, a year and a half, to see what you’ve done.”

“The least compelling part of my forecast is (that wage growth remains high)… That part has been the most troubling, the lack of evidence that wages are slowing. They’re slowing a little bit but it’s been pretty grudging.”

“We’ve definitely seen the banks in trouble and you’ve seen a huge decline in deposits, they’re down about 5% which hasn’t happened since the 1930s, but credit growth is still strong… but credit expansion tends to be a lagging indicator”

“These are the possibilities: no recession, a soft landing, a hard landing, or a severe recession. I don’t see a severe recession… something like ’08/’09. I’m in the hard landing camp but I am always thinking, it’s possible maybe none of those are right. Maybe we just have an extended period of time of very slow growth, maybe for several years…”

For what little it’s worth, if Mr. Hyman is wrong he has probably identified how in that last sentence. 

There is much more to the interview so enjoy it above.