IVOV - Inflation Or The Economy - Which Breaks First?

2024-06-08 08:01:46 ET

Summary

• Thus far, the consumer has been resilient - supported by a strong job market, excess pandemic savings, and solid wage gains.
• MACRO trends are pulling at consumers' purse strings, questioning the sustainability of the positives.
• It should be clear by now that inflation is still present, and at some point, markets will have to come to grips with reality and all it brings with it.
• Global Economic data shows improvement, helping the S&P 500 and NASDAQ move to new highs.

"If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand." - Milton Friedman

My View Of Wall Street

As goes the consumer, so goes the US economy. As Wall Street knows, the importance of the consumer cannot be overstated. That's because consumer spending is the main engine of growth, representing ~70% of US economic activity-nearly 10% more of the economy than it did in the early 1980s. That is why there is so much focus on what the consumer will do next. Thus far, the consumer has been resilient-supported by a strong job market, excess pandemic savings, and solid wage gains.

However, as reported earlier, some cracks have started to surface. Today, we'll discuss many factors impacting the consumer and highlight the more challenging areas.

The Negatives

Consumer Confidence Is Awful

Consumer confidence has been highlighted here for quite some time-economists who expected confidence to pick up after COVID have been disappointed. Any flicker of a pickup has been celebrated by those trying to spin the situation, but the numbers do not lie. The onset of higher energy costs and goods inflation in the last two years has doused any hope of a pickup in sentiment. The reports show that confidence isn't anywhere near pre-pandemic levels. Instead, it's at historic lows....

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