From Hero To Zero At The Fed: Janet Yellen

Someone seems to have hit the emergency button at the Fed, as even though the central bank said that everything was just fine with the American economy just a few weeks and months ago, the situation has currently escalated into a full-blown panic mode.

On Thursday, the Board of Governors of the Federal Reserve has called an ‘emergency’ meeting for Monday, April 11. That by itself is already very surprising, but a lot can be explained after looking at the most recent publication of the Atlanta Fed. The results of the forecasted GDP of the Atlanta Fed, should push a lot of people and investors into a depression. Just eight weeks ago, the Atlanta Fed forecasted GDP growth of approximately 2.5%, which would’ve been a very healthy growth rate, and even on March 11, the Fed was still expecting the GDP to grow by 2.3%.

Source: GDPnow, through Atlanta Fed

But since then, everything started to go downhill. In just four weeks time, the Atlanta Fed has revised its GDP growth rate from 2.3% to just the 0.1%, which means are basically at the tipping point between a growing economy and the first signs of a new recession. Whatever the final outcome will be, it is now pretty clear that the economy in the United States is stalling. And the rate at which the economy seems to be crumbling is really terrifying.

Source: tradingeconomics.com

Just two weeks ago we started to warn you for this, as a corporate profits are going down, and the increases in EPS were mainly boosted by the companies’ share buyback programs and not by higher net profits. We were also very worried to see that a lot of companies are overspending on share buybacks, rather than strengthening their balance sheets and we were afraid this would return into the spaces like a boomerang. This also seems to be confirmed by the Money Flow Index of the S&P index. The last time we have reached an ‘overbought’ status on that indicator, the S&P fell by 15% just a few weeks later. Will we re-experience a similar sell-off now?