... the only question is when. It is perhaps worth noting that the last time we showed this chart was in late 2018, just before Powell capitulated on the Fed's last tightening cycle, and not long before the covid pandemic sparked the biggest monetary and financial stimulus in world history. In other words, it is virtually assured that every time the Fed pulls away the punch bowl the market crashes.

Another thing that is virtually assured, is that by the time the tightening Fed realizes it has made a policy mistake, the economy is in a recession.

It's why as DB's Jim Reid writes in his Thursday Chart of the Day, the Fed's decision will have profound implications for the start date of the next recession.

Indeed, having accelerated their taper, it now opens the path for the first hike in the cycle to occur in H1, with March now widely cited as the month of "liftoff" but for the purpose of Reid's "thinking note," let's say the first rate hike is in June.

So given that the Fed tightening eventually contributes to recessions, when should the next one occur?

A look at the table in a recent DB note "When the Fed hike: what happens next?" suggests the median and average time to the next recession is 37 and 42 months after the first hike. So that takes us to July 2025 and December 2025 respectively.  That said, the earliest gap over 13 cycles is 11 months and that would take us to May 2023.