Why Fed Rate Hikes Don’t Bother Me

No recession here. [Logo]( Why Fed Rate Hikes Don’t Bother Me Dear Reader, Go back with me to May 2022. That is when my forward-looking proprietary Transformity Market Index went negative, which meant a bear market for stocks was coming fast. As confirmation of my forecast, the Atlanta Fed's GDPNow index went negative on July 1, 2022. Translation: Real GDP growth in the United States would be negative in the second quarter of 2022. Tobin Smith True Market Insiders And sure enough, we DID have a mild recession–in Q2 2022! Fortunately, I used my "Bear Market Is Coming" warning system to reallocate into 70% cash. I then made some crazy money deploying that liquidity into what I called the "REXIT" trades, i.e., trades that would benefit from the West's exit from the Russian natural gas/uranium/oil market. I then proceeded to crush the oncoming bear market with 120% to 180% in profits plus dividends. Meanwhile the rest of the bear market for high-flying tech stocks got crushed by Fed rate hikes. So why am I bringing all of this up? Well, it's August 2023, and with the help of the fine people at True Market Insiders and their technical analysis system, I've made history repeat itself. My Transformity Investor subscriber portfolio has overwhelmingly proven the "recession 2023 is coming" naysayers and bear market soothsayers wrong. But WHY did so many stock market strategists who got it so right ahead of the 2020-2021 pandemic bull market get it so wrong by predicting a 2023 recession? Here is my theory… The more I dig deeper into the structure of the US economy in 2023 and the GDP numbers, the more I discover about our country's economic resiliency. I've found that the United States has an amazing and unique system of GDP growth guard rails that keeps consumer consumption chugging no matter what the Fed does with interest rates. So why is the US economy in 2023 (and possibly into 2024) so darn hard to break? Well, part of the answer is that we already had a mild rolling recession in Q2 2022–it's just that no one seemed to notice. Why? Because there are several SECULAR, not cyclical, growth dynamics that are exclusive to the United States economy. These dynamics keep our GDP consumers consuming WHILE we still maintain a rate of two open jobs for every person able and willing to work. America's Anti-Recession Dynamic #1: Today monthly Social Security checks and Medicare Advantage health benefits go to more than 74 million Americans. And that monthly benefit number rose 12% between 2021 and 2023. That growth rate, my friends, is a big deal. By the way, a Medicare Advantage plan means that Uncle Sam is picking up 90% of the bill. Add in another 11 MILLION households with at least one retired union or government worker that receives a GENEROUS monthly pension plan payment. Monthly pension ranges from $2,800 a month to $4,800 a month. Then add in 4.7 million Federal employees that receive an average of $4,400 a month and 1.8 million military retirees that receive an average of $4,200. Adding this all up, we arrive at the conclusion that more than 60% of American households TODAY have at least one Social Security, government or union pension beneficiary in the home. In addition, according to the 2020 American Community Survey, 78.6% of married households headed by someone 65 years or older own their home without a mortgage. So add back that monthly cash flow to the equation.     Do the math and find out how much cash YOU would have left over every month if YOU had no mortgage… and your health care bill was nearly $0… and you had $3,500 on average coming in every month until you quit breathing? And don't forget that the Pension Rights Center says about 65% of retired people have some form of a pension/401k/IRA plan. Net Net, people over 65 account for nearly 20% of US consumer GDP. And I can attest that in Scottsdale, Arizona where I live, people 65 and older spend 80% of their monthly discretionary income on SERVICES! Now let's go to an economic reality in the United States that many Americans are not aware of. America's Anti-Recession Dynamic #2: A) America has about 3,300 separate counties, but… B) Just around 63 of those counties account for close to 72% of the ENTIRE ANNUAL GDP. The average income of a household located in America's top 63 counties ranked by county GDP is $145,760, almost 3X the national average. And yes, America's 63 Super Counties are CRUSHING it economically. The wealth effect from the 2023 bull market is helping them a lot. How hard are they crushing it? As of 2022, the top 20% of households in the United States controlled 86% of the country's household wealth. And about 85% of those top 20% come from–wait for it–America's 63 Super Counties. So why does America's economy NOT buckle from the weight of 6% mortgages, 9% auto loans, and 28% credit card debt? As long as America's 63 Super Counties generate 72% of US GDP and continue to buy new homes/cars/dinners and other expensive services AND our 65+ aged households maintain their spending. . . . . . the US economy in 2023 is UNsinkable. And that is why: A) The US stock market is NOT pricing in a 2023-2024 recession; B) High Yield Bonds are NOT pricing in a 2023-2024 recession; C) And the bull market contagion for stocks is now migrating to other sectors from just the original Magnificent 7 Mega Tech Stocks. Bottom line: It is the STRUCTURAL, not cyclical, consumption of goods and services in this country that fights the good fight against the Federal Reserve's business cycle machinations and manipulations. Join me next Wednesday when we'll move onto something more fun… Wine! Have a great week!   PS.: My TMI colleague, Costas Bocelli, is a legendary investor and spent almost a decade as a floor trader at the Philadelphia Stock Exchange. He's starting a new service called Dark Shadows Weekly. As a subscriber you'll get his weekly expertise on when to invest and how to invest, using either stock or options. Click [here]( to learn more about this unique service.   [Here’s the EXACT Sector to Put Your Money Into]( [A Sneaky Way to Play Earnings from Both Sides]( [Let’s Fight Risk and Uncertainty With Gold]( [YouTube]( [Facebook]( [Twitter]( [Instagram]( [LinkedIn]( DISCLAIMER ©2023 by True Market Insiders, LLC, Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of: True Market Insiders, 7901 4th St. N STE 6113 St. Petersburg, FL 33702. The information contained herein has been prepared without regard to any particular investor's investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. True Market Insiders LLC is not an investment advisor and is not licensed to give specific financial advice. The chairman of True Market Insiders, Chris Rowe, is also the CEO, CIO and owner of Rowe Wealth Management LLC, which is not owned by and is not the owner of True Market Insiders. True Market Insiders will remove email addresses from our mailing lists if that email address hasn’t interacted with our content during a prolonged period. If you think your email was removed in error, please contact customer service at 855.822.0269 or support@truemarketinsiders.com.   [Unsubscribe]( | [Manage Your Preferences]( | [Privacy Policy](