Last week’s economic data did nothing to clarify what’s next for the equities market.  So frustrating.  I still believe most markets go down before going up, but everywhere you look, there is  contradictory information without a singular, clear message.

The power of the consumer continues to hold up the market.  We are still spending and that’s great for the economy, but SOOO much of this spending is going into debt instruments like credit cards.  This is odd – the public generally feels that a recession is more likely than not in 2023, yet the spending is still strong.  Shouldn’t we be saving? Do we just not care or believe that debt has consequences?

Consumer Spending:

source: tradingeconomics.com

Retail Sales: 

Unbelievable

source: tradingeconomics.com

United States Debt Balance Credit Cards:

source: tradingeconomics.com

Personal Income:

So consumers are still spending, but the growth in personal income is slowing.  I don’t get it.

source: tradingeconomics.com

The following chart likely explains why, despite recessionary consumer data, consumers continue to spend and drive the economy forward.  For some reason, the consumer is growing in confidence.  Do we anticipate a short recession, a soft landing, or maybe no recession at all?  Regardless of the why, we’re collectively trying to ignore the reality – at some point, the American debt and inflation will come back to haunt us.

Consumer Confidence:

source: tradingeconomics.com

Last week, inflation data came in hotter than expected which adds to the narrative that the Fed will NOT stop rate hikes for some time and even longer to cut. The good news is that the rate of inflation continues to go down and maybe this is what the market (not economy) is focused on.

Inflation Rate:

source: tradingeconomics.com

So, where do we go from here?  I wouldn’t be surprised if we run up or if we crash into a heavy recession.  When the market data confuses me, I tend to spend more time as a technical trader/short term investor.  Lines and charts provide direction and strategies that I can follow and apply capital to.  Although I’m still very heavily in cash, I’ll continue to bounce in and out of short-term trends until I feel more confident in going long.

Trade’em well.