The market had a banner year in 2021, with the S&P 500 Index advancing over 25%, according to data from the St. Louis Federal Reserve. But tailwinds that fueled gains shifted dramatically in 2022. No longer were the economic fundamentals favorable.

“The unfortunate cost of reducing inflation” could bring “some pain to households and businesses,” Fed Chief Jay Powell remarked in August. Pain is rarely distributed evenly. Some folks go unscathed, while others bear the brunt of the discomfort.

After four-straight 75 basis-point (bp, 1 bp = 0.01%) rate increases, the Federal Reserve downshifted and boosted its key rate, the fed funds rate, by 50 bp last week to 4.25 – 4.50%. But it didn’t muddy its hard-hitting anti-inflation rhetoric.

The Federal Reserve, interest rates, and inflation have been big topics this year. Chatter about a possible recession has been part of the conversation, too. A few weeks ago, we looked at the enormous amount of stimulus cash that remains in savings, which is cash that could support spending and delay the start of a recession. It’s an analysis that went against the grain of the consensus. But the stash of cash could eventually dry up.

Can there be too much hiring? Can job growth be too fast? It seems like an odd question. But following a better-than-expected jobs report on Friday and the initial negative reaction (shares pared losses and finished mixed), the question is worth exploring.

Recession fears are rampant. Interest rates are up, which discourages spending, and housing, a leading economic indicator, has fallen into a steep recession. Reported on Friday, the Conference Board’s Leading Economic Index (LEI), which is designed to detect trends in advance, is down 8-straight months, including a sharp 0.8% decline in October.

The Fed may dial back the size of its rate increases—75 bp increases began in June—but the peak in the fed funds rate, what analysts are calling the terminal rate, could be higher than previously expected. And the Fed could maintain that level for a while.

The U.S. Bureau of Economic Analyst reported that Q3 Gross Domestic Product (GDP), which is the largest measure of goods and services, expanded at an annualized pace of 2.6%, erasing the declines from Q1 and Q2—recession averted, for now.

Every month, the Conference Board releases what’s called the Leading Economic Index, or the LEI. The LEI consists of 10 economic components, whose changes tend to precede what happens in the economy. The LEI has always turned lower before the onset of a recession, and ticks higher near the end of a recession.