LEI Flashes Red: The US Economy Teeters on the Brink of Recession

The Leading Economic Index (LEI) just dropped its most ominous signal yet—America's 'unstoppable' economy is buckling under its own weight. Forget soft landings; this looks like a nosedive in slow motion.

Wall Street's favorite crystal ball—the LEI—hasn't been this grim since pre-2008. Six straight months of decline, and suddenly those 'transitory' economic headaches look chronic. But hey, at least the Fed can still call it 'data-dependent adjustment.'

Main Street feels it first: hiring freezes, shelved expansions, that queasy 'last-one-out-turn-off-the-lights' vibe. Meanwhile in DC, politicians will surely solve this with more acronym-laden stimulus packages—because printing money fixed everything in 2020, right?

Silver lining? Crypto markets love chaos. When traditional finance clutches its pearls, decentralized assets start flexing. Just saying—your 401(k) might want to make friends with Bitcoin.

Bowman and Waller break ranks as pressure mounts on Powell

Bowman, speaking in Prague, said she saw a case for easing policy next month, if inflation data doesn’t spike. Waller backed her on CNBC, saying he supports a cautious approach to lowering rates. Both were appointed by Trump during his first term and are now being floated as possible replacements for Powell next year. Their sudden push for cuts has shaken the Fed’s unified front and sent markets adjusting expectations fast. The CME Group’s FedWatch tool now puts the chance of a July rate cut at 23%, with an 82% probability of a cut in September.

Mohamed El-Erian, chief economic advisor at Allianz, told CNBC on Monday, “There’s some political influence starting to come into the FOMC.” He said the fact that two governors openly backed July cuts, both being Republican-aligned, was no coincidence.

“Now suddenly we’ve had two Republican-leaning governors who came out with this notion of July, and they’ve moved the market,” he said. “What I do know is that Jay Powell is going to have a lot of difficulty trying to get everybody unified on a message.”

Trump allies want faster cuts while Powell sticks to patient stance

From the outside, Trump and several of his officials want dramatic rate cuts, at least two full percentage points. That’s not going to happen. Waller himself rejected that idea, saying, “I want to start slow.” Even the Fed’s most recent projections place the end-point rate around 3%, only 1.25 points below the current level.

If the Fed cuts too fast, it could backfire. When it cut by a full point between September and December last year, bond yields actually rose, because traders thought growth and inflation WOULD rise too.

Jai Kedia, a research fellow at the Cato Institute, said the idea that rate cuts immediately help the economy is wrong. “The idea that the Fed does something and there’s immediate transmission and everything works exactly the way it’s supposed to work is just a myth,” he said. “You know, people way overvalue the Fed’s effect on the economy, especially in an immediate kind of manner.”

Meanwhile, Bill Pulte, who leads the Federal Housing Finance Agency, posted on X Monday that momentum is “building for Powell’s immediate resignation,” claiming “it is clear that Powell’s political bias against our great President needs to be looked at.” Powell hasn’t responded, but the Fed chair is just one of 12 voters on the rate-setting committee, and right now, he doesn’t seem to have the whole team on the same page.

On the other side of the aisle, Senator Elizabeth Warren has also been calling for a rate cut. During this week’s hearings, Powell will likely face questions from both parties. Republicans demanding to know why rates haven’t come down, and Democrats urging him not to wait.

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