USMC - Trending Higher And Trending Lower

2023-11-16 01:50:00 ET

Summary

• Inflation has dropped down significantly which means that the Fed, in my opinion, will stop raising rates now, and maybe even lower them, at some point next year.
• The heat is not off yet, but it is coming off and it is a marked change for the both the economy and the markets, in my opinion.
• On the other side of the fence are borrowing costs and credit card debt, which I also hope will make the turn and head lower.

Finally, we are getting some good news about the economy. Inflation has dropped down significantly which means that the Fed, in my opinion, will stop raising rates now, and maybe even lower them, at some point next year.

The heat is not off yet, but it is coming off and it is a marked change for the both the economy and the markets, in my opinion.

On the other side of the fence are borrowing costs and credit card debt, which I also hope will make the turn and head lower. According to MarketWatch, the average credit card balance just hit a new record.

In the third quarter, the country's credit card debt burden hit a new record high of $1.08 trillion, according to the Federal Reserve Bank of New York. That was up $154 billion from the same period in 2022, which is the biggest year-to-year jump since the Fed started collecting the data in 1999.

Delinquencies, too, are on the rise. According to MarketWatch, the average American household has a credit card balance of $9,068. That's compared to an average of $13,405 owed on auto loans and $13,439 in student debt.

Then, there are the delinquencies. The share of newly delinquent credit card users, those that are at least 30 days past due on one account, rose to 2% in the third quarter, up from 1.7% in the first and second quarters of 2023.

That's the highest rate since at least 2015. Both the debt and the delinquencies will not be positives either for the markets or the economy. However, the pending lower rates will be a significant help.

We are also getting some good news out of Congress. U.S. House lawmakers overcame partisan animosity Tuesday to pass a temporary government funding bill that greatly lowers the risk of a shutdown.

The legislation now goes to the Senate where majority Democrats are expected to back it even though it doesn’t include funding for Ukraine and Israel.

Senate leaders will need the cooperation of all senators to overcome procedural hurdles and meet a late Friday evening deadline, when the federal funding lapses.

A White House official said the President would sign the measure if it passes the Senate. The Bill would extend, until January 19 funding for the departments of Veterans Affairs, Energy, Agriculture, Transportation as well as Housing and Urban Development, with the rest of the government including the Pentagon extended to February 2.

This will also be a positive for the markets, in my view, as it will take some pressure off the worry about this situation and also help to defuse the concern of Moody’s threat of a downgrade of the American debt. It is one more step in the right direction, in my opinion.

So, as we have both inflation and bond yields trending lower, I think we will have equity prices trending higher. One play here is to look at securities with high dividends as there is likely to be a rush to find and purchase almost anything with high dividends as the yields will rapidly dissipate as the underlying securities head higher in price.

The geopolitics in the world is still a negative but at least internally, we seem to be slowly climbing out of the woods, and I am heartened by this development.

Carry on!

Original Source: Author

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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