The US stock market, a complex ecosystem constantly in flux. Headline data currently presents a picture of conflicting narratives. While some factors suggest robust economic foundations and potential for continued growth, others paint a picture of simmering uncertainties and potential headwinds. This video examines the intricate tapestry of the US stock market, exploring 3 key indicators of our current economic expansion:
1 Robust Consumer Spending: Consumer spending remains the backbone of the US economy. Data indicates that consumer confidence holds steady, suggesting continued support for economic activity. However, As consumer spending continues unabated, credit card debt is at historic highs and rising. This suggests that consumers are spending beyond their means. This upside down model can’t continue forever so the question becomes, ‘What will happen to the stock market when consumers run out of credit and stop spending.’ Markets may enter a prolonged selloff.
2 Interest Rates: Markets remain convinced that the Federal Reserve is on the verge of cutting interest rates. Our question is, ‘If the economy is expanding as the data suggests, why would the Fed cut rates?’ Rate cuts are usually indicative of economic duress. Cutting interest rates in an expanding economy risks re-igniting inflation.
3 Corporate Profitability: Corporate earnings remain strong but forward guidance has been cautious. Not upbeat as we see during a healthy expansion. Data can be misleading. The veracity of Earnings per share as a measure of corporate health has been skewed with share buybacks.
We believe that the conflicting data is grounds for caution as we continue to move through this presidential election year.
The information contained in this Higgins Capital communication is provided for information purposes and is not a solicitation or offer to buy or sell any securities or related financial instruments in any jurisdiction. Past performance does not guarantee future results.
Market Watch: Analyzing Stock Trends on February 27 2024, a complex ecosystem constantly in flux, Headline data currently presents a picture of conflicting narratives, some factors suggest robust economic foundations, others paint a picture of simmering uncertainties, Robust Consumer Spending, consumer confidence holds steady, Interest Rates, Rate cuts are usually indicative of economic duress, Corporate Profitability, Corporate earnings remain strong, forward guidance has been cautious