all right let's talk markets this morning joining us is Barry nap he's managing partner and director of research at Ironsides M macroeconomics Barry what are you thinking about the markets right now what are you thinking about the economy what do you think about tech spending um well I'm I'm uh pretty negative at least for the next couple of months for the market um fairly negative for the economy and um reasonably positive for Tech spending so um I think that's probably the only decent part of the econom or yeah really the only decent part of the
the economy right now as far as the you know the whole Market setup to me the um the fundamental backdrop the earnings story looks fairly weak right now we did have a strong earnings quarter in the second quarter but we were cing against the low point for the three quarter earnings recession we had which was the fourth quarter of 22 and first half of 3 earnings are only expected to be up about 5% or so in the third quarter extech and communication Services only about two and when I look at revisions for each of the
sectors net revisions the number of analysts increasing estimates less those decreasing estimates they're going down fairly sharply including for Tech and in particular for Consumer discretionary which sort of tells you you know you were talking with contesta about Foot Locker earlier and you know Target Walmart all had had what looked like decent results but the estimates aren't going up they're actually going down for the most part so that that fundamental backdrop really concerns me but the thing that concerns me the most is the labor market um I was kind of surprised how many people just
brushed off that big downward revision to you know the initial Benchmark revision to um payrolls for the year ended March I've been expecting that we were thinking it would be something like negative a million if you just apply that growth rate to the small business component of employment which of course they they guesstimate every month using the birth death model you have employment growth below 1% now for the private sector the last three times that happened in 90 2001 and 2007 we were either in recession or on the verge of recession when you you know
my basic premise here all along has been that the way the FED conducted the tightening uh passive QT and aggressive rate hikes meant that they had to hike rates further than they would have had to do otherwise if they'd been a little more aggressive selling off some of their bond purchases that caused this deep yield curve inversion that put all the burden of weaker Demand on small businesses they finance at floating rates they get their money from small Banks and the small business sector is is really struggling you see it in the ADP numbers where
small business employment is growing basically one tenth of a percent whereas large business employment is growing much more rapidly like 3% so I think that underpinnings of the US economy are really weak it wouldn't shock me if we were in recession by election day now maybe we avoid it but the fed's certainly got to get started with aggressive and aggressive PA to get aren't they riding to the rescue now or you just don't think what they're going to do is going to be enough well it's going to take time right because if we're talking about
the small business sector they really need to cut rates aggressively you know I recall having a conversation with a woman that runs a ski Weare company up the street for me purely anecdotal but she asked me at the beginning of the year how much would the FED cut rates and I said probably a percent and her response was big whoop that's not going to help me all that much right to carry her inventory and all so they really do need to get that policy rate down to four very quickly disin the curve help the small
banking sector help the small business sector and um you know it's it's not clear they're prepared to do that now yesterday's conference board consumer confidence the labor component of that uh implies that the unemployment rate's going up again this month probably to 43 with the um U6 underemployment rate getting closer to eight% that'll probably be enough to get them to kick off with a 50 so that's a good start and maybe we can narrowly avoid uh a recession but um you know to me that labor part of the economy just it's really weak here and
I'm I'm kind of surprised I mean the fed's woken up to it but not all fed members um Barry let me let me just run real quickly we're we're out of time but yesterday we were speaking with Roger Ferguson the former Vice chair of the FED he thinks the market may be over anticipating what the FED might do he's looking more at 25 uh basis point cuts and kind of taking a look around to see how those work before the FED does anything if that's the policy then what um then I think that the economy
has a greater probability of going into recession um I think what they should do would be to go 50 and use the summary of economic projections their forecast to say we're probably only going to four that way they can temper I think what Roger's concerned about is the market getting concern you know Market getting ahead of them and thinking they're going to have to cut all the way to two and a half or something but they really do need to start aggressively to head off the problems in the small business sector