Inflation aid was palpable this week, with each the producer value index and client value index reinforcing that inflation is trending down. The actual challenge for the market was an rising “progress slowdown” narrative, and fears about how far it might go. As we speak’s retail gross sales report (up 1.0% month over month, up 0.4% ex-autos, properly above expectations of an 0.3% and 0.1% achieve, respectively) and powerful commentary on the patron by Walmart reinforces that the patron could also be slowing, however remains to be resilient. Backside line: the comfortable touchdown could be very a lot alive. The place the markets at the moment are The S & P 500 has executed a whole spherical journey, from roughly 5,500 simply previous to the roles report, to the 5,186 shut on Aug. 5, and now again to roughly 5,500. .SPX 1M mountain S & P 500 Index over the previous month. Similar with CBOE Volatility Index (VIX) . It is made a whole spherical journey in the identical interval. Concern spiked to ranges not seen since Covid, after which rapidly receded, transferring from 15 to 60 to fifteen. This has all occurred whereas market sentiment has remained principally impartial. One investor sentiment gauge, the weekly survey of buyers for the American Affiliation of Particular person Traders, is basically impartial: Bulls vs. Bears (AAII weekly survey, ended Aug. 14) Bullish 42.5% (historic avg. 37.5%) Impartial 28.6% (historic avg. 31.5%) Bearish 28.9% (historic avg. 31.0%) Supply: AAII In periods of euphoria, bullish ranges go into the low 50s, so a studying within the low 40s is properly under euphoria. Let us take a look at different measures of the market: Inflation: Trending decrease Rates of interest: Charge cuts anticipated Development: Slowing however no recession (Atlanta Fed tasks Q3 GDP at 2.9%) Earnings: Holding The truth that earnings progress estimates are holding up is crucial. S & P 500 earnings progress of 10% is predicted in 2024, and 15% progress is seen for 2025. These estimates are little modified in latest months. True, income progress hasn’t been as sturdy, and far of the rationale earnings are holding up is value slicing. That, and the necessity for extra income, is a transparent challenge for 2025. Regardless, inflation is moderating. Development is slowing, however no recession is obvious Rate of interest cuts coming and earnings are nonetheless holding up. That’s virtually the definition of the comfortable touchdown. If none of that impresses you, right here is Walmart CFO John David Rainey in a CNBC interview: “On this atmosphere, it is accountable or prudent to be somewhat bit guarded with the outlook, however we’re not projecting a recession.”
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