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Macroeconomics

THE FED WON'T BAIL OUT YOUR CREDIT CARD!THESE CHARTS ARE VERY SIMILAR! REAL ESTATE IS FAR DOWNSTREAM FROM FED POLICY, WITH MANY ECONOMIC ACTORS IN BETWEEN, ESPECIALLY COMPARED TO LARGE CORPORATIONS WHO HAVE ACCESS TO FINANCIAL DARK POOLS AND THE MANY FED PROGRAMS! THIS MAKES IT MUCH HARDER FOR THE FED TO PROP UP REAL ESTATE VALUES AND MUCH EASIER TO PROP UP THE VALUE OF CORPORATE STOCK AND DEBT! THIS IS SIMILAR TO THE SMALLER COMPANIES IN THE RUT, WHO MUST ACCESS CONVENTIONAL CREDIT MEANS, AND THUS ARE SUFFERING MUCH MORE THAN THEIR TECH COUNTERPARTS IN THE NDX! LENDING STANDARDS ARE TIGHTENING FOR MAIN STREET, AND IT IS ONLY A MATTER OF TIME BEFORE THIS TIGHTENING REACHES ALL LEVELS OF THE ECONOMY! THE FED WILL NOT BAIL OUT YOUR AUTO LOAN OR CREDIT CARD, AND EVENTUALLY BANKS WILL TIGHTEN LENDING CONDITIONS FOR EVEN THE LARGEST OF ENTITIES, IF THEY HAVEN'T ALREADY BEGUN TO.... www.nbcnewyork.com
TVC:NDQShort
by UnknownUnicorn4195243
4
Consumer staples are the best of all possible worlds right nowSo we've got macroeconomic forces pulling in a couple different directions right now. One the one hand, the Fed is talking about pumping trillions of dollars more liquidity into the market, which should further inflate equity prices. On the other hand, with coronavirus cases continuing to rocket, we're starting to see economic data fall off a cliff. Consumer staples and metals are the natural havens. Today, the University of Michigan measure of US consumer sentiment for July came in at 73.2 versus the consensus expectation of 79. This was the largest negative surprise on record, and it's going to have a big negative effect on the consumer discretionary sector. And what's bad for retail is also bad for banks, as CMBS delinquency reached 10.32%. We also got a large negative surprise on housing starts today, up only 2.1% vs. the 4.9% consensus expectation. Home building has been the one bright spot in the economy as Americans flee the cities for the suburbs, so this is a concerning deterioration in that market. The ECRI leading index has been flattening, and mobility is falling as scared consumers remain at home even in states that haven't reclosed. California's reclosure this week was a huge deal, since the state accounts for nearly 15% of US GDP. Consumer confidence chart: twitter.com Mobility chart: www.dallasfed.org Meanwhile, the Fed's balance sheet grew this week for the first time in four weeks, which means that liquidity-- and the accompanying asset price inflation-- is on the upswing again. Congress is actively working on as much as $3.5 trillion in new stimulus, and Lael Brainard of the Federal Reserve is signaling that the Fed may get more aggressive about trying to hit its 2% inflation target, even to the point of "overshooting" that target to make up for years of weak inflation. (Current CPI is about 1.2%.) See Brainard's remarks here: www.federalreserve.gov With economic data starting to sour, I don't really want to be in equities. But with more liquidity coming, I don't really want to be out of equities, either. My solution is to hide out in metals and consumer staples. A fall-off in mobility will be bad for nearly every sector of the economy, but it should be bullish for consumer staples and grocery store stocks, some of which report earnings in the next few weeks. That makes the consumer staples sector a natural safe haven as California recloses and frightened consumers stay home. Consumer staples also pay dividends, and they're a little more reasonably valued than technology, which is the other sector that might conceivably benefit from reclosing. As you can see on the chart, staples recently made a bullish trend line break (which I alerted before it happened), and they have continued to strengthen since.
AMEX:XLPLong
by ChristopherCarrollSmith
2