The Fed Funds Futures curve is predicting that something will be happening in the economy around late September and October that is going to cause the Fed to begin cutting rates.
The only explanation that makes since is the economy having a hard economic landing in Q3 or Q4 to where the Federal Reserve starts cutting rates. If the Fed Funds Futures curve was predicting a soft landing in Q3 or Q4, the Fed wouldn’t have to start cutting rates 9 times as shown on the chart above. It would be a much more gradual rate cutting cycle. The Fed Funds Futures curve is clearly predicting some type of bad economic event in Q3 or Q4 that’s going to trigger a rapid rate cutting cycle to begin.
A hard economic landing refers to a sudden and severe downturn in the economy, often characterized by a sharp decline in GDP, high unemployment rates, and a significant decrease in consumer and business spending. This type of landing can result in a recession or even a depression. A soft economic landing, on the other hand, refers to a gradual and controlled slowdown in economic activity. This landing is typically characterized by a decrease in the rate of economic growth, a slight increase in unemployment rates, and a moderate decrease in consumer and business spending. This type of landing aims to prevent a recession while still allowing the economy to cool down after a period of rapid growth.
Massive Layoffs Underway
During the first three months of this year job cuts in the United States were 396 percent higher than they were during the same period a year ago.
We are seeing the mass layoffs show up in initial jobless claims:
“The damage was especially bad in tech, which has announced 102,391 cuts so far in 2023. That’s a staggering increase of 38,487% from a year ago and good for 38% of all staff reductions. Tech already has cut 5% more than for all of 2022, according to the report, and is on pace to eclipse 2001, the worst year ever amid the dot-com bust.” – Source: https://www.cnbc.com/2023/04/06/layoffs-are-up-nearly-fivefold-so-far-this-year-with-tech-companies-leading-the-way.html