June 6, 2023 | Daily JAM, Mid Term, Morning Briefing |
Today, Tuesday, the World Bank said on Tuesday that the global economy would slow this year and next as rising interest rates take a global toll. In its latest Global Economic Prospects report the World Bank projected that global growth would slow to 2.1% this year from 3.1% in 2022. That is slightly stronger than its forecast of 1.7% in January. But that good news is tempered by a forecast that calls for growth at a slower 2.4% rate instead of the bank’s January prediction of 2.7% growth.
May 30, 2023 | Daily JAM, Mid Term |
This week’s Trend of the Week video is COVID is Hitting China Again. China is seeing another wave of COVID. We can expect this wave to peak at the end of June with around 65 million cases a week. While that’s a huge number, the previous wave saw 35 million cases a day. So, yes, this is a smaller wave, but it certainly won’t help China’s economy, which is struggling to get back to a 5% growth rate. The country is also dealing with a youth unemployment crisis where the recent graduate unemployment rate is around 25%. This wave of COVID isn’t likely to shut down the entire country–if only because China’s leadership isn’t about to go back to the prior policy of widespread closures of factories and entire neighborhoods–but it is likely that some people will be less inclined go out, mandate or not, and they may self-impose their own lockdown until the wave subsides. This is all likely to take a bite out of the growth rate which was edging back toward 5%. As stocks stagnate and a recovery rally in China looks to be coming to an early end, I’ll be posting about shorting China ETFs on my paid site, JubakAM.com.
May 24, 2023 | Daily JAM, Mid Term |
We all know that a continued standoff on the debt ceiling would be bad for the U.S. economy and financial markets. But even a deal along current lines is going to cost jobs–lots of jobs–and take a bite out of economic growth, according to Bloomberg Economics Spending cuts expected in an eventual deal to raise the U.S. debt limit could cost the country as many as 570,000 jobs and make the recession projected by Bloomberg Economics even worse.
May 23, 2023 | Daily JAM, Mid Term |
Today, May 23, finally saw some fear in stock prices. The Standard & Poor’s 500 closed down 1.03% on the day. The Dow Jones Industrial Average ended down 0.59%. The NASDAQ Composite was down 1.17% and the NASDAQ 100 dropped 1.21%. The small-cap Russell 2000 was off just 0.21%. That’s a remarkably small drop considering the S&P 500 was up 9.97% for 2023 as of the close yesterday. And the NASDAQ Composite was ahead 22.01% for the year as of the May 22 close. Looking at this market, what cries out for explanation isn’t why stocks slide today but why they have remained so strong in the signs of a slowing economy and a continued debt ceiling crisis that could, potentially, result in a default by the United States.
May 16, 2023 | Daily JAM, Mid Term |
U.S. retail sales increased in April by 0.4% from March levels. Retail sales figures for March were revised upwards to show a 0.7% decrease. Economists surveyed by Dow Jones had expected a 0.8% increase for the month. (I would note that retail sales numbers are not adjusted for inflation, so real, that is, inflation-adjusted, retail sales for April were essentially flat since the all-items Consumer Price Index rose 0.4% in April.) Still, the increase in nominal retail sales was the first in three months after the 0.7% drop in March and February. Today’s report does re-enforce one troubling trend in consumer spending.
May 16, 2023 | Daily JAM, Mid Term, Morning Briefing, Short Term |
The typical pattern is for households to run up credit card balances for holiday shopping and then for consumers to pay down credit card balances in the first quarter. That’s what happens in a healthy economy where consumers are living within their means and aren’t seeing family budgets stretched by high inflation. But that isn’t what happened in the first quarter of 2023. For the first time in 20 years, consumers added to their debt loads in the first quarter rather than paying down some of their fourth-quarter spending.
May 15, 2023 | Daily JAM, Mid Term, Videos |
This week’s Trend of the Week is Credit Squeeze. SLOOS (Senior Loan Officer Opinion Survey), a Fed survey, asks bank lending officers what they’re seeing in the credit market for commercial industrial loans. In the most recent survey, 46% of these officers report that their banks are making it harder to get loans. This is a textbook example of Hyman Minsky’s credit cycle. After a period of booming lending, the credit cycle returns to a period of tightening credit, often coinciding with eye-opening events like the Silicon Valley Bank failure, and a slowing down of the economy overall. The SLOOS report also showed a 56% drop in demand for commercial loans in the first quarter–an indicator that companies are aware that loans are harder to come by. Companies are having real trouble raising capital which is resulting in merger and/or acquisition deals for early-stage companies and employee layoffs as CEOs and CFOs attempt to hoard cash. The signs are that the Fed is taking notice of this contraction in the credit market and is starting to factor it into rate hike decisions. The Fed may decide it doesn’t need as many interest rate increases as it originally thought if the supply of credit is shrinking quiickly.
May 12, 2023 | Daily JAM, Mid Term, Morning Briefing |
It’s only a survey of consumer sentiment so it’s not very important to the financial markets, right? Wrong. The University of Michigan survey of consumer sentiment for May illustrates perfectly the trap that the Federal Reserve is caught in right now.
May 4, 2023 | Daily JAM, Mid Term |
When is a 4.5% year-over-year drop in earnings for the stocks in the Standard & Poor’s 500 good news? When the forecast for first-quarter earnings projected a 6.8% drop. Bloomberg now projects, with 74% of the companies in the S&P 500 reporting first-quarter results, that earnings for the stocks in the index will be down 4.5% year over year this quarter.
May 2, 2023 | Daily JAM, Mid Term, MMM, Videos |
This week’s Trend of the Week is The Pain is Spreading. By pain, I mean layoffs. It started with technology companies as we saw job cuts from companies like Meta Platforms, Amazon, and Alphabet. Then recently announced cuts of 7,000 employees. Now, layoffs are spreading to other areas of the market. 3M (NYSE: MMM), a generally reliable blue chip stock, announced they’d be cutting 2,500 jobs back in January and have now added 6,000 more jobs to the chopping block- about 10% of their total workforce. This is in reaction to slowing sales and the potential for losses from liability lawsuits. In the most recent quarter, organic sales were down 4.9% (better than the expected 6.9%) with a guidance of a 2% sales decline for 2023. While 3M is trying to cut costs with layoffs, Wall Street remains skeptical. 3M hasn’t seen the rally other blue chip stocks have seen recently. The company has so many products out there, it is representative of the market as a whole. And this one example plays into the bigger picture of the slowing economy, greater job losses, and, possibly, a recession.
April 24, 2023 | Daily JAM, DIS, Mid Term |
Layoffs aren’t just for technology companies right now. Disney (DIS) has begun the second round of a projected three rounds of job cuts that will add up to a total reduction of 7,000 employees this year.
April 18, 2023 | COST, Daily JAM, GDX, GLD, GOLD, KO, Mid Term, PEP, RWM, Special Reports |
10 Picks for the Coming Recession. This one is especially difficult. Not only do I face the usual crystal-ball problem that comes up whenever you try to pick an investment for the future–what’s the macro and micro world going to look like in 6 months or a year from now–but I’ve got two big Recession-specific challenges. First, is there actually going to be a Recession in 2023? All the signs, in my opinion, point toward a recession in the second and third quarters, but it’s by no means guaranteed that we’ll have the two quarters of negative GDP growth that’s required by the minimal definition of a recession. And what’s the point, you might well ask, of making picks for a coming recession that never arrives? And, second, how bad will this recession be?