• Consumer sentiment deteriorated more than expected at the beginning of May, according to the latest U. Michigan survey.

 

 

  • Households are increasingly concerned about higher unemployment ahead, which often serves as a leading indicator for the unemployment rate.
  • Inflation expectations jumped with gasoline prices.
  • Real household income expectations tumbled.

 

 

  • Buying conditions for houses hit a record low.

 

 

  • The New York Fed’s US consumer survey indicated rising short-term inflation expectations in April, while longer-term expectations have eased.
  • The Citi Economic Surprise Index continues to trend lower, …

 

 

  • Negative economic surprises signal lower Treasury yields ahead.
  • The PPI report exceeded expectations, with the April gains in core wholesale prices driven by the services sector. However, there was a sharp downward revision for the month of March.
  • Mortgages comprise the largest portion of household debt, and mortgage delinquencies have remained relatively low. However, consumer debt (credit cards, auto loans, etc.) delinquencies have been rising. The charts below show transitions into serious delinquency.

 

 

  • Credit cards:

 

 

  • Auto loans:

 

 

  • The year-over-year changes in the core CPI resumed their downward trend.
  • After the “benign” CPI report and weak retail sales data, the market fully priced in two Fed rate cuts this year, perhaps in September and December.
  • Stocks surged, Treasury yields declined, the Dollar dropped and precious metals rose.
  • US manufacturing output unexpectedly declined last month, as vehicle production slowed.
  • But manufacturers are more optimistic about future activity, expecting stronger demand in the months ahead.
  • US financial conditions have eased substantially this year.

 

Market Data

  • Goldman expects the S&P 500 to end the year at 5200 (currently at 5308).

 

 

  • Investors still see the Magnificent 7 as the most crowded trade.

 

Source: BofA Global Research

  • The S&P 500 represents 40% of the global market capitalization.

 

 

  • Used Tesla prices:

 

 

  • Goldman expects the S&P 500 to end the year at 5200 (currently at 5308).

 

Great Quotes

 

“Whenever you find yourself on the side of the majority, it is time to pause and reflect.” – Mark Twain

 

Picture of the Week

 

Blue Whale tail, Natural History Museum, London

 

 

All content is the opinion of Brian Decker