De Facto Recession

"We are in a self-inflicted inflationary and high interest rate environment."

Summary: The Federal Reserve didn’t raise interest rates last week but was clear that they’re also not thinking about lowering rates any time soon. They may still raise rates again. However, the economic commentary seems to be continuing to weaken. In particular, interest rate-sensitive segments of the economy are feeling the pressure of higher rates. The only buyers making large ticket purchases are those who can afford to pay with cash.

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Macro

The Fed stayed on hold but is still focused on bringing down inflation 

"So the fact is, the committee's not thinking about rate cuts right now at all. We're not talking about rate cuts. We're still very focused on the first question, which is: Have we—have we achieved a stance of monetary policy that's sufficiently restrictive to bring inflation down to 2% over time sustainably? That is the question we're focusing on…The process of getting inflation sustainably down to 2% has a long way to go." - US Federal Reserve Chair Jerome Powell

Financial conditions have tightened but that may not be enough

“So I think what we can say is that financial conditions have clearly tightened and you can see that in the rates that consumers and households and businesses are paying now and over time that will have an effect. We just don’t know how persistent it’s going to be and it’s tough to try to translate that in a way that I’d be comfortable communicating into how many rate hikes that is.” - US Federal Reserve Chair Jerome Powell

Higher interest rates are weighing on economic activity

"...perhaps the most important thing is that these higher Treasury yields are showing through the higher borrowing costs for households and businesses and those higher costs are going to weigh on economic activity to the extent this tightening persists and, you know, that the mind's eye goes to the 8%—near 8% mortgage rate, which could have, you know, a pretty significant effect on housing. So that's how I would answer your question." - US Federal Reserve Chair Jerome Powell

There has been a change in sentiment in the last month 

"The only thing I would add is that the last month as you've seen sentiment change a little bit. Obviously, with the breakout of the war in the Middle East and the potential consequences around that risk and a significant move in the belly and the longer end of the interest rate curve sentiment has certainly dampened a bit there. Maybe gets a little bit better today, but we would like to certainly see that geopolitical situation stop as soon as possible and not expand. But that's been a bit of a headwind. But it's interesting, this economy, as we all know, is different than anything that any of us have experienced in careers. And for the most part, our clients are saying, our business is great, but we really don't -- don't understand what's going on around us." - KeyCorp (KEY 0.00%↑) President of Key Institutional Bank Andrew Paine

"...we have experienced an unexpected accelerated decline in our comparable store sales from the lagged effect of these policies in the early part of the fourth quarter of 2023..To take this into account, we have updated our 2023 sales and earnings guidance, which now reflects the potential that the accelerated decline in our comparable store sales could be sustained for the remainder of the fourth quarter" - Floor & Decor Holdings (FND 0.00%↑) CFO Brian Langley

"...we had expected to see improvement in the second half of the year. But based on what we are seeing today that is not likely to be the case. Instead, we expect wholesale demand across our brands to remain pressured. As such, we are revising our fiscal year 2024 outlook and now expect sales to be down from a high-teens to low-20s percentage versus fiscal year 2023." - Malibu Boats (MBUU 0.00%↑) CEO Jack Springer

There is now more intense pressure on businesses 

"...we started to see more intense macro pressure on our business related to spend late in the quarter, and that has continued through October. As a result of higher interest rates and tighter credit markets, capital and cash have become less affordable and available for SMBs. Some of our larger businesses have scaled back their spend while both customers and their suppliers became more selective with their payment choices. Business behaviors changed rapidly in this respect...what we saw late in the quarter and continued to see into October, is that the discretionary spend of the large businesses is getting more scrutiny today" - Bill Holdings (BILL 0.00%↑) CEO Renè Lacerte

"Now for some color on the September quarter. Our business slowed down as expected, as our customers continue to respond to the effects of increasing business uncertainty, slowing economic activity and a result in increase in inventory. The combined effects of persistent inflation and high interest rates, we believe, are contributing to the weak macro environment. All regions of the world and most end markets experienced varying degrees of weakness." - Microchip Technology (MCHP 0.00%↑) CEO Ganesh Moorthy

Small business spend is slowing

"...we've talked for a number of quarters now about that environment being very soft. We continue to see signs of that in the most recent quarter in our forward estimates assume that we're going to see a soft spend environment going forward." - Bill Holdings (BILL 0.00%↑) CFO John Rettig

Are we in a de facto recession? 

"" - Alexandria Real Estate Equities (ARE 0.00%↑) Executive Chairman and Founder Joel Marcus

International