• Economists continue to boost their projections for the current quarter’s GDP growth. Forecasts for the full year also continue to rise, driven by expectations of resilient consumer spending.

 

 

  • Consensus projections show slower growth over the next couple of quarters, with momentum picking up in Q4.

 

 

  • Durable goods orders dropped sharply in January, primarily due to a decline in aircraft sales (which tend to be lumpy).

 

 

  • Excluding transportation, there was still a slight reduction in orders for durable goods.
  • Moreover, capital goods orders are now lagging shipments, signaling weaker future demand.
  • The Conference Board’s index of consumer confidence unexpectedly declined this month.

 

 

  • The spread between expectations and current conditions remains at recessionary levels.

 

 

  • The Conference Board’s survey showed deteriorating intentions to purchase homes.

 

 

  • The Q4 GDP growth was revised slightly lower, to 3.2%, driven by inventories. Domestic demand was adjusted upwards.
  • Mortage applications are holding at multi-year lows, as rates climb.
  • Here is the affordability index.

 

 

  • Housing inflation may end up being stubbornly high for some time.
  • Although nominal personal income saw a significant increase in January, real disposable personal income remained essentially unchanged (due to a surge in inflation), with real spending experiencing a decline.
  • The supercore PCE inflation, closely monitored by the Fed, surged in January. This picture does not scream “rate cuts.”

 

 

Market Data

 

  • The S&P 500 experienced 253 trading sessions without a 2% daily drop.

 

 

  • The Conference Board’s consumer sentiment report shows growing bullish sentiment among US households.
  • A breakout ahead for Russell 2000?

 

 

  • This chart shows the longest equity market runs without an all-time high. (Japan’s TOPIX is shown here, which is still slightly below its high from 1989)

 

Source: Deutsche Bank Research

 

  • US companies have significant market power across major global tech segments.

 

Source: Numera Analytics (@NumeraAnalytics)

 

  • A remarkable correlation …

 

 

  • The S&P 500’s distance above its 200-day moving average is stretched.

 

 

  • This year’s earnings projections for tech mega-caps continue to diverge from the rest of the S&P 500.

 

 

  • Current valuations point to sub-5% returns over the next decade.

 

 

Great Quotes

 

“Never argue with stupid people, they will drag you down to their level and then beat you with experience.”

― Mark Twain

 

Picture of the Week

 

Grand Canyon National Park, AZ

 

 

 

All content is the opinion of Brian Decker