Well, personal income and spending data kicked things off this morning. Income rose 0.4% in April, while spending rose a sharp 1%. That was actually the strongest rise in spending since August 2009, though it followed lousy figures in the first quarter and contrasts with several warnings from a wide swath of retailers.
The news on home prices was also fairly healthy. An index of prices in 20 top U.S. metropolitan areas rose 5.4% from a year ago in March, according to C&P/Case-Shiller. That’s down from the peak appreciation rates we were seeing in late 2015, but slightly above forecasts.
On the flip side, the Chicago Purchasing Managers Index slumped to 49.3 in May from 50.4 in April. That missed expectations, and marked the sixth month in the last 12 below the 50 mark – a level that represents the dividing line between expansion and contraction for Chicago-area manufacturing.
|The news on home prices was fairly healthy.|
Meanwhile, the Dallas Fed’s manufacturing index was pretty much a disaster. The overall gauge plunged to -20.8 from -13.9, while readings on everything from new orders to capital investment intentions to employment dropped.
Finally, the Conference Board’s consumer confidence index dropped to 92.6 in May from 94.7 in April. Not only did that miss expectations by a wide margin, but it was also the worst reading in 10 months.
The most important figures are still to come – those on jobs from ADP and the Labor Department. Everyone on Wall Street is watching to see if the nascent slowdown in job creation we’ve seen recently is going to get worse.
|“The big picture is one of slowing growth and rising recession risk.”|
But in the meantime, I’ll offer my take on the economy: The cycle has turned. We’re going to see fluctuations in the data on a week-to-week basis. But the big picture is one of slowing growth and rising recession risk, risk that will only grow with time.
Do you think that assessment is on target? Are you worried about consumer confidence and regional manufacturing activity? Or are you encouraged by the latest figures on spending and house prices?
With some key jobs figures looming, what are you seeing in your own back yard? More or less hiring? Companies expanding or retrenching? I’m sure any “color commentary” you can offer would be greatly appreciated by your fellow investors.
The long Memorial Day weekend is over, and all of us investors are now facing a long, hot summer of potentially significant action. So what will that action look like?
Reader Frank said: “Mike, you are asking, ‘Who’s left to buy?’ With that huge pile of money sitting on the sidelines, there’s massive buying power out there. With all that selling, a better question is, ‘Who’s left to sell?'”
Reader Justin added: “I’d say the ‘ninth inning’ was July 2015, and we’re well into our second extra inning. With nobody earning any interest income, the only way to get by is to take from principal holdings. It is an insidious kind of wealth confiscation.”
Reader Chuck B. said: “According to Direction Alerts, we are in what must be a very unusual, and potentially very scary market. Their charts indicate that we are in a very bullish situation within a bearish market, with strong bias toward continuing. At the same time, sentiment is within 0.17 of 100, indicating an utterly extreme complacency among investors.
“That would seem to indicate that when complacency ends, it may do so with a crash that will destroy many investors’ wealth almost instantly. It might well affect many markets, not just stocks.”
And Reader Tricky said: “Hunker down. I’m 27% cash, 18% precious metals, 10% inverse funds, and the other 45% in stocks that all pay steady dividends in the 6.5% to 9% range. I reinvest all of my dividends. So if the individual positions fall, I get more shares for my dividends.”
Meanwhile, on the topic of Switzerland (and potentially other countries) doling out an “allowance” to citizens rather than a wide range of targeted social benefits, Reader Tommr said:
“Unconditional Basic Income (UBI) sounds like a really bad idea to me. If everyone is given the same amount of money, such as the $30,000, that money will be pretty much worthless and wouldn’t buy much of anything!
“It’s like when IRAs were first coming into wide use in the 1970s. The banks were all giving people projections showing that if they invested their IRA contributions with them, they would end up with a million dollars at retirement. I thought, and said so at the time, that if everyone has a million dollars, that million dollars would be worth nothing.”
Reader Jim added: “The Huffington Post makes UBI sound like the solution for all our social problems. It sounds good in theory, but it presumes everyone will spend it wisely, which is highly unlikely. It assumes people will stop making bad decisions that cause so many of our problems now. It also is very vague about where all this money will come from.”
I appreciate you taking time to weigh in before and during the holiday weekend. Stocks clearly finished May on a strong note, but they’re still mired in a range that has persisted for 18 long months now. It will take a convincing upside break, not to mention a serious turn in the economic and credit cycles, to signify a true bullish turn of events in my opinion.
Anything else you want to add? Then feel free to do so in the discussion section below.
Utilities shares have been strong performers in the past several months, and now, stockholders in one company are even happier. That’s because Great Plains Energy (GXP) just agreed to buy Westar Energy (WR) for $8.6 billion, or $60 a share. That was a 13% premium to where Westar was trading before the deal news hit.
What goes up must come down, especially when you’re talking about unjustified financial bubbles. So the trading action in China’s artificially inflated commodities market is worth noting. Just one month after surging 23%, Chinese iron ore prices collapsed 24% in May. Other commodities are also cooling, calling into question the legitimacy of the initial move.
Sick of getting stuck in miles-long security lines and missing flights at the airport? The New York Times has some helpful tips on ways you can cut down on the wait this summer. Signing up for the T.S.A.’s Precheck program is one of your best options.
So let me ask: Have you made money in the utilities space this year? What do you think about the roller-coaster move in commodities over in China? How about the lengthy security lines at airports around the country? Hit up the comment section and share your thoughts when you have time.
Until next time,