Blog | CB Investment Management

Irony Alert! Where Does “Outlawing Recession” Go?


Just because the market rewards recklessness in the current phase doesn’t mean we have to be reckless.

Sven Henrich

I view the markets as fundamentally broken. Passive investors have no opinion about value. They’re going to assume everybody else has done the work.

David Einhorn 

“By relentlessly depriving investors of risk-free return, the Federal Reserve has spawned an all-asset speculative bubble that we estimate will provide investors little but return-free risk. Abandoning systematic investment discipline amid the most extreme market conditions in history would be a costly way to buy a fleeting sigh of relief.”

John Hussman 

“We think that the whole banking industry could be driven into multiple periods of loss as they divert income to loss provisions. 

Chris Whalen

The relentless 14 week rally in the S&P 500 has once again led to record levels of speculation and bullish allocations. Passive investing, buybacks, and government spending generally favor big caps. Yet, at the same time, the entire rally has also seen record weakness more broadly in earnings and most small cap stocks and record selling from corporate insiders, at record valuations. Among them, Jeff Bezos and Mark Zuckerberg.

When will the economic fundamentals really recover? What are the key factors looking forward, both bullish and bearish?

The Bullish case is mainly for a continuation of the factors dominating over the last few months, but there are some new additional elements.

  • Policy has significant control of markets currently with deficit spending still having very few constraints into 2025. This is the main factor enabling policy to “outlaw” recession.
  • The federal reserve currently can easily justify interest rate cuts and further money printing to support the banking system which  still has ongoing emergency solvency issues.
  • With just 8 months to go to the election, there is just a short period for these policies to continue, that makes this objective very achievable and intense further policy support may be in place if necessary.
  • Passive investors will not soon change their position as their approach is reactive with a lag. Only something unexpected seems likely to change that.
  • Speculators will not soon change their view either although they will react more quickly as they will protect gains if the market starts declining and if not be forced by margin to cut positions.
  • The energy market is being manipulated for low prices, which should also be supportive. Last year the oil market was influenced by selling down the SPR reserves of oil, and this years gas exports are being limited, in order to increase domestic supply and suppress natural gas prices. Don’t miss the energy insights in this video.
  • Economic data appears to be presented in the best possible light. Even the revisions seem to shed an unusually rosy outlook compared to a more detail impartial long term assessment.


On the Bearish side:

  • Market Breadth is the worst we have ever seen for this long a period. The average number of names outperforming the average stock has fallen further for longer in this unusual rally.

The bank crisis is far from resolved. Deposits are moving out again.

  • If policy is successful and the economy grows there is less need for interest rate cuts and financing relief.
  • Delinquencies and bankruptcies are still rising quickly in credit cards and auto loans.
  • In time the dollar could weaken as it is in decline internationally as a reserve asset.
  • Inflation could begin to rise again.


The bull market in stocks is currently showing little sign of weakness and clearly has ongoing policy support. Nevertheless, there are still two sided risks as to how this will play out in 2024.

Earnings and credit growth remains very weak despite government policy support and even if a recession is avoided through government spending how sustainable will growth be?

If, on the other hand there is positive GDP growth will this delay the  much needed interest rate cuts? And will growth bring inflation with it? How high will yields rise in the record refinancing and how will the economy bear the cost?

Longer term, the prospect is full of irony. “Outlawing Recession” won’t solve the long term growth and debt problem of the last 70 years. All it will do is accelerate it.

Excessive policy intervention as a solution to economic health is an approach that historically is unblemished by success.

Best Practice is a matter of your Best Interest.

Education and a Commitment to Informed Consent is an Obligation.

Chris Belchamber is an IRMAA Certified Planner

Medicare’s IRMAA impacts every retirement plan. Learning how to mitigate it is available via IRMAA Certified Planners designation.

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