ACTV - Week On Wall Street: Stay On Course
2024-01-27 00:37:13 ET
Summary
- Global PMIs improve, but "manufacturing" remains in contraction.
- A baffling backdrop, US Manufacturing in recession, LEI data contracts for 21 straight months while Q4 GDP is reported at 3.3%.
- The S&P and DJIA record more new highs, but the YTD performance on the equity market is more of a "mixed" scene.
- Investors who rely on preconceived notions or emotions instead of price action find themselves in a quandary today.
"Hey, here is where I am, and I'm here because I steered my horse here" .. . Chris Gardner, author of "The Pursuit of Happyness"
2023 was a year in which we saw many well-worn paradigms shattered. It was the first time in decades that rapidly rising interest rates (the fastest pace in history) neither destroyed aggregate demand nor collapsed corporate profits. We keep revisiting the culprit so much it's become annoying. Especially for the economists who can't figure out THIS economy and are still waiting for the recession. The overzealous stimulus tossed excess cash, providing a much bigger cushion than anticipated, rendering the US economy rate-insensitive. That tossed aside the economic playbook with all of its tried and true formulas. One thing is for sure. The folks who argued the stimulus packages in 2021 and beyond are now vindicated. All of that spending is now proven to have been unnecessary.
In this environment, traditional recession indicators all failed, as models premised on variables like leading economic indicators (now down for 21 straight months), manufacturing surveys, bank credit growth, and yield curve inversion obscured economic strength based on vast excess liquidity. We saw bank failures have no systemic impact. A 550 basis point increase in the Fed Funds rate has yet to dent GDP or stock valuations....
Week On Wall Street: Stay On Course