Where Is the Economy Going?

May 30, 2024

Mish's Daily

By Mish Schneider

GDP showing a slowdown of the consumer. However, consumer spending, like so many things in the macro right now, is nuanced.

While some stores suffer poor earnings like Kohls, TJ Maxx thrives.

While people spend more on what they need than want, many are switching their spending to self-improvement-diet drugs a part of that

While costs in many areas continue to climb (insurance, housing, certain food items)-we are also seeing prices decline in airlines, car prices)

All of this is in part due to expectations changing that the Fed will stick to higher for longer and that inflation, particularly in the services area, will stay elevated.


Where is the economy going?

Long bonds are up a bit from the April lows-

Money supply is increasing

The dollar is testing the lower part of the trading range

Geopolitics continue to impact

  1. Freight costs
  2. Supply chain
  3. Government spending and rising debt
  4. De-Globalization
  5. US reshoring

And then there is Mother Nature-with floods or extreme droughts impacting crops-coffee, orange juice, cocoa-to name a few, now we watch for a predicted rough hurricane season and the impact to infrastructure.

This all points to a more stagflationary environment.

And does not rule out recession down the road-especially if the FED is considering a “twist” where they buy long bonds, and sell near term bonds, but without raising the rates, in essence trying to flatten the yield curve. Or worse, they lower rates sending the signal they are worried about the economy.

Since August 2023, the U.S. has lost over 1.3 million full-time jobs, while gaining 1.4 million part-time jobs over the same period. The year-over-year measure of full-time jobs has fallen into recession territory.

Banks are worried-United Wholesale Mortgage came out with-homebuyers who qualify won’t need to put down an upfront down payment.

The first mortgage will pay 97% of the cost-second mortgage will pay the remaining 3% with no accruing interest and will balloon-and paid off when mortgage is refinanced or paid back.

But this assumes no drop in housing prices or reduction of interest rates-in that case, homeowners cannot refi to lower rates if they get enough equity out of their house to pay back the 2nd mortgage.

Bottom line-the best barometers of next direction

  1. Junk bonds versus long bonds
  2. Silver to gold ratio
  3. Oil prices
  4. Transportation sector-which broadcasted this last dip from the highs
  5. Tech and Utes leading take a backseat to small caps picking up.
  6. Dollar breaks down under 104


Educational purposes only, not official trading advice.

For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

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ETF Summary

S&P 500 (SPY) 529 pivotal

Russell 2000 (IWM) 210.80 ATHs resistance 200 support

Dow (DIA) From 40k to breaking the 50-DMA

Nasdaq (QQQ) Watching 455 level

Regional banks (KRE) Watching the range

Semiconductors (SMH) 240 pivotal

Transportation (IYT) distribution phase-needs to clear back over 64.00

Biotechnology (IBB) 135 now resistance

Retail (XRT) Resilient sector in a bullish phase

iShares iBoxx Hi Yd Cor Bond ETF (HYG) Broke under 77-needs to get back over that level again

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