Morning Briefing

Bad day for consumer stocks; good day for commodity shares

Bad day for consumer stocks; good day for commodity shares

The Conference Board’s latest reading on consumer confidence showed consumer expectations in June fell to their lowest level since 2013. The consumer confidence index for June fell to 98.7 from 103.2 in May, below expectations for a reading of 100. The report’s expectations index, which is based on consumers’ short-term outlook for income growth, the job market, and overall business conditions, fell to 66.4, its lowest reading since March 2013.

Please Watch My New YouTube Video: “Ouch! The Fed Gets Honest About Inflation”

Please Watch My New YouTube Video: “Ouch! The Fed Gets Honest About Inflation”

My one-hundred-and-forty-eighth YouTube video “Ouch! The Fed Gets Honest About Inflation” went up today. In front of the Senate Finance Committee today, Fed chair Jerome Powell said that the Fed has all the tools it needs to fight inflation–except, he admitted, that nothing it does to raise interest rates will lower the price of gasoline or food. Those prices don’t figure into the core inflation rate the Fed watches, but they are very real to consumers. More money spent on food and fuel means less money available for everything else.

Consumer savings rate plunges to post-Great Recession low; bad news on recession odds

Consumer savings rate plunges to post-Great Recession low; bad news on recession odds

A deeply troubling look at consumer balances from Statista. Well, deeply troubling if you hope that the United States will avoid a recession. (Frankly, I’m in the “Hope we avoid but I’m afraid we won’t camp.”) In April, Americans saved just 4.4% of disposable personal income, according to data from the U.S Bureau of Economic Analysis. That’s down from 12.6% in April 2021 and it’s the lowest rate since September 2008, when the country was in the middle of the Great Recession.

It’s a war of two narratives–today “recession” narrative replaces “rate cut” narrative and stocks fall heavily

It’s a war of two narratives–today “recession” narrative replaces “rate cut” narrative and stocks fall heavily

Yesterday, the stock market was up with the Standard & Poor’s 500 gaining 1.46% on the day and the NASDAQ Composite up 2.49%. Listening to the Federal Reserve’s policy statement after the June 15 meeting of its Open Market Committee, Wall Street chose to hear a promise of interest rate cuts as early as the end of 2023 and certainly in 2023. Aggressive interest rate increases in 2022, from this perspective, are just a necessary precondition to those interest rate cuts. Today, the stock market is down with the Standard & Poor’s 500 falling 3.25% and the NASDAQ Composite off 4.08% at the close. The narrative on investors’ and traders’ minds today is the rising odds of a recession–75% odds in favor by 2024 a Bloomberg survey of economists says with 25% odds of a recession in 2023. For a day that trumps the hopes for 2024 interest rate cuts (which would, after all, only materialize if the economy has, indeed, tumbled into recession. I expect this “War of the Two Narratives” to continue for a while

Fed’s Dot Plot projections on economy, inflation, interest rates could have been much worse–wait for better times in 2024, central bank says

Fed’s Dot Plot projections on economy, inflation, interest rates could have been much worse–wait for better times in 2024, central bank says

The projections released by the Federal Reserve on Wednesday, June 15–the so-called Dot Plot–show a central bank that sees a tough 2022, especially on interest rates and inflation, but a definite improvement in 2024. This fits with the developing Wall Street narrative that sees inflation dropping in 2023 and 2024 and the Fed looking to cut interest rates in 2024.

Consumer savings rate plunges to post-Great Recession low; bad news on recession odds

Fed faces inflation “disaster” as data show signs that inflation expectations are becoming embedded

The latest Consumer Expectations survey (that is for May) from the New York Federal Reserve shows U.S. households’ anticipate inflation will rise at a 6.6% annual rate over the next year. That’s up from April expectations for a 6.3% rate. The May anticipated rate matches March results in the survey for the highest inflation anticipation on record.

Stocks  plunge as May CPI inflation rises to 8.6%

Stocks plunge as May CPI inflation rises to 8.6%

Headline Consumer Price Index inflation in May rose to a new annual high rate of 8.6% in May, the Bureau of Labor Statistics reported today, June 10. Headline prices rose 1% from April. The big drivers were, as expected, food (with prices up at a 10.1% annual rate) and energy. The core CPI, which strips out food and energy prices, rose 0.6% in May from April and at a 6% annual rate.

Another day, another downgrade for global economic growth

Another day, another downgrade for global economic growth

Today, Wednesday, June 8, the Organization for Economic Cooperation and Development warned that Russia’s invasion of Ukraine is fueling rapid inflation and slowing global growth. “We are not projecting a recession ” at this time, said Mathias Cormann, the organization’s secretary general, but the organization lowered its estimate of global growth to 3% in 2022 from the 4.% percent it predicted at the end of last year. It estimated that average inflation among the organization’s member nations was likely to run close to 9% this year, double its previous forecast.