We've had a brutal few years since 2020... Broken supply chains – and opportunities for higher profits for corporations – sent the price of goods soaring. It's shocking how quickly it all changed.
Another Bullish Sign for the Economy
By Vic Lederman, editorial director, Chaikin Analytics
We've had a brutal few years since 2020...
Broken supply chains – and opportunities for higher profits for corporations – sent the price of goods soaring. It's shocking how quickly it all changed.
We can see it easily in home prices. In the second quarter of 2020, the median sale price of a new home was about $322,600. By the peak during the fourth quarter of 2022, the price soared to around $479,500.
That's a nearly 49% change... in less than two years.
But it wasn't just home prices. Darn near everything got more expensive.
Consumers have felt that pain directly. Just a month ago, I wrote that consumers were "especially miserable."
But now, we're seeing an important indicator change. In fact, consumers are more optimistic about inflation than they've been since January 2021.
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On January 8, the Federal Reserve Bank of New York released its December 2023 "Survey of Consumer Expectations." Like the name implies, this report measures what folks expect about the economy.
The below chart from the survey shows what consumers think the rate of inflation will be one year in the future. In other words, it's not measuring today's inflation rate. It's measuring expectations.
Take a look across the past decade...
As you can see, as inflation soared in the wake of the pandemic, so did consumer expectations for it.
This is important because high inflation expectations tend to make folks pessimistic. After all, paying higher prices for everything is miserable.
But since the peak in 2022, consumer inflation expectations have been falling. And now, they're even closer to the Federal Reserve's 2% inflation target.
This is important because it means that the pain consumers are feeling is easing. And they expect it to continue easing going forward.
We're also seeing that in some important data...
Home prices have come off their highs. As of the most recent data, the median sale price for new homes is about 10% off its peak.
And used-car prices, another important measure for consumers, are falling. On the lot, used cars cost about 36% less than at their peak.
And it looks like these prices will fall even further. Prices at wholesale auctions for used cars are down more than 50%.
Inflation is cooling. And consumers are baking that into their future expectations.
So what does this mean for us as investors?
Put simply, it's more evidence that we're on the other side of the interest-rate cycle.
In fact, the Fed looks increasingly likely to cut interest rates this year. And that means the central bank is switching posture from discouraging economic activity to encouraging it.
Folks, this is an incredibly bullish sign.
Consumers are feeling less of "the squeeze." That means they'll keep spending. And that means big potential for more economic growth ahead.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.98%
13
15
2
S&P 500
+1.23%
152
260
86
Nasdaq
+1.98%
47
37
15
Small Caps
+0.99%
667
926
323
Bonds
+0.32%
Information Technology
+2.31%
41
22
1
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Information Technology
+4.13%
Communication
+1.4%
Financial
+0.9%
Discretionary
+0.53%
Industrials
+0.3%
Health Care
-0.75%
Staples
-1.03%
Materials
-1.46%
Real Estate
-2.12%
Energy
-3.04%
Utilities
-3.7%
* * * *
Industry Focus
NYSE Technology Services
27
7
1
Over the past 6 months, the NYSE Technology subsector (XNTK) has outperformed the S&P 500 by +10.00%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks.
Top Stocks
AMAT
Applied Materials, I
TSM
Taiwan Semiconductor
QCOM
QUALCOMM Incorporate
* * * *
Top Movers
Gainers
AMD
+7.11%
TRV
+6.72%
PYPL
+6.01%
AVGO
+5.88%
KEY
+5.61%
Losers
MOH
-4.08%
CNC
-3.2%
ENPH
-2.88%
AES
-2.82%
DG
-2.77%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
SYF
BRO, ZION
UAL
No earnings reporting today.
Earnings Surprises
TRV The Travelers Companies, Inc.
Q4
$7.01
Beat by $1.92
STT State Street Corporation
Q4
$2.04
Beat by $0.21
FITB Fifth Third Bancorp
Q4
$0.99
Beat by $0.09
RF Regions Financial Corporation
Q4
$0.52
Beat by $0.04
SLB Schlumberger Limited
Q4
$0.86
Beat by $0.03
* * * *
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