Fiscal Policy & COVID support

As followers of our Out of the Box series would know, I have openly stated that my current base case is a recession at the start of 2024. This a bold claim given how many have been wrongfooted on recession calls lately and considering how much the US keeps outperforming expectations.

To be sure, I am not predicting the end of the world but a rather ordinary recession. Nor do I even think that the US is the most exposed. But a few things have lately caught my attention at motivated me to dive into a few rabbit holes

Back in the spring, I emphasized how this rate-hike climate would favor players with solid balance sheets (see here), a lot of market power, and little need for finance. The complete opposite of the COVID stimulus dynamics, basically.

I will argue that time has been generous to this move- at least when we look at the equity performance:

Chart 1: S&P 100 Index vs Russell 2000 Index