MacroVoices #362 Jeff Snider: Soft Landing or Crash Landing?

Episode Summary

Executive Summary: Jeff Snyder argues the Fed has not engineered a true soft landing; instead, disinflation likely reflects demand destruction and recession dynamics already visible in curves, labor data, and Europe/China activity. Markets are pricing forced rate cuts well before Powell expects them, while crude oil, gold, and bond curves all signal worsening growth and demand weakness.

Main Topics: Inflation is slowing for cyclical, not monetary, reasons (Priority: 5/5): Snyder says the recent drop in CPI reflects supply/demand imbalance resolving and likely recessionary pressure, not the Fed creating genuine monetary stability. Soft landing skepticism vs. market pricing (Priority: 5/5): Although officials and some data imply resilience, Snyder argues market curves across the U.S. and Europe are discounting a much weaker economy and eventual rate cuts. European slowdown and unprecedented bond inversion (Priority: 5/5): German retail sales, trade, and industrial data weakened sharply while Bund and Treasury curves inverted in historically extreme ways, suggesting significant stress beneath the surface. Labor market divergence and early recession signals (Priority: 4/5): The payroll survey looks strong, but household survey and full-time employment trends resemble the start of past recessions, with hiring and hours already weakening. China reopening is likely less powerful than expected (Priority: 4/5): Snyder and the hosts question whether China’s reopening can offset global weakness, given structural changes in Chinese policy and weak export demand. Oil market and inventory fragility (Priority: 5/5): Despite historically low inventories and tight supply buffers, WTI front-month contango persists, which Snyder and the hosts interpret as a warning sign of demand fear and liquidity stress.

Key Arguments: The recent disinflation is more likely caused by the economy rolling over than by successful Fed policy. Genuine inflation requires excess monetary creation, which Snyder says is not present at a level comparable to the 1970s. The market is pricing lower rates sooner than the Fed expects, implying an involuntary easing cycle rather than a deliberate policy victory. Unprecedented inversion in German and U.S. curves suggests recession risk, not soft landing confidence. The strong U.S. payroll report conflicts with weaker household survey and full-time employment data, which more closely track recession onset. Europe may have avoided an energy catastrophe, but not the broader economic damage already done by last year’s shock. China’s reopening may disappoint because structural policy changes and weakening exports reduce its ability to drive global growth. Front-end contango in WTI is alarming because storage incentives should be minimal when inventories are already extremely low.

Data Points: Episode number: 362 - Macro Voices episode identifier Production date: February 9, 2023 - Episode air/production date EIA crude inventory build: 2.4 million barrels - Weekly U.S. crude inventory data discussed in opening segment SPR drawdowns: 0 drawdown for the second week in a row - U.S. Strategic Petroleum Reserve activity Cushing inventory build: 1.0 million barrels - Regional crude storage change Gasoline inventory build: 5.0 million barrels - EIA product inventory data Distillates inventory build: 2.9 million barrels - EIA product inventory data U.S. crude production: 12.3 million barrels/day - Post-pandemic high in U.S. production U.S. production increase: +100,000 barrels/day - Weekly change in U.S. crude output German retail sales: collapsed in December - Evidence of European consumer weakness German trade: exports and imports contracted sharply - December trade data cited as recessionary U.S. jobs report: huge January payroll number - Used as counterpoint to recession narrative; exact figure not stated NASDQ recent rally: about 20% from January 6 bottom - Post-bottom tech rebound noted in post-game S&P 500 level: around 4,160 - Current spot during post-game discussion S&P 500 upside expected move: around 4,260 - Options expected move into next OPEX S&P 500 downside expected move: around 4,060 - Options expected move into next OPEX QQQ spot level: around 308 - Current level discussed in post-game QQQ upside expected move: around 318 - Options expected move into next expiration QQQ downside expected move: around 298 - Options expected move into next expiration VIX spot: around 19.2 - Volatility discussion in post-game VIX resistance: 25 - Level above which concern would increase materially DXY resistance: 104 - Key dollar pivot level discussed in post-game Gold recent pullback: from high 1900s to about 1875 - Sharp drop preceding discussion of correction WTI curve: front-end contango despite low inventories - Oil futures structure viewed as a warning sign Fed terminal-rate stance: no rate cuts this year per Powell - Powell’s public guidance during the interview Market pricing on rates: cuts earlier than Fed expects - Near-term forward spread and Eurodollar futures interpretation

Pivotal Quotes: "the disinflationary process has started" — Jay Powell (quoted by Jeff Snyder): Used to frame the Fed’s view that inflation is easing and justify holding rates steady "the market is expecting three-month rates to be lower six quarters ahead than they are today" — Jeff Snyder: Explaining the collapse in the near-term forward spread and why markets expect lower rates "There should not be any contango whatsoever" — Jeff Snyder: On WTI futures, emphasizing how unusual it is for oil to incentivize storage with inventories already so low

Implications: Listeners should treat “soft landing” claims cautiously: markets, labor data, Europe, and oil curves all point to recession risk and likely forced rate cuts. Positioning should stay alert to renewed volatility in bonds, commodities, and equities.