Hey Market Pilot,
It has been a wild few years with the craziness of the Covid-19 pandemic and all the things that the Fed did to support the economy and the market. We saw one of the strongest bull markets in history and a record number of new traders came into the market since most of us were home, twiddling our thumbs due to the stay-at-home orders. Now it seems the chickens are coming home to roost and the bull market is over.
One way to see that the bull market is over is to look at the economy since the market reacts months in advance. Inflation has been a huge issue for the economy and the Fed is starting to get after it as hard as it possibly can. This means they need to tighten their monetary policies and raise interest rates. All of this is to slow the economy in order to break inflation.
It seems to be working, but it could also be happening due to inflation itself. The economy is indeed slowing down and the most recent economic report shows this:
May Empire State Manufacturing -11.60 vs. 15.0
consensus; prior 24.6
This rapid decline shows the economy is slowing faster than most think. New orders dropped nearly 34 points in May to -8.8, and the shipments measure fell at the fastest pace since early in the pandemic, sinking about 50 points. Many people probably don’t track these numbers, but when they become important like this, we should be aware of what they are signaling. The economy is slowing as the Fed wants, and there will be real-world ramifications for us. So keep this in mind for your own life and plans going forward. Make sure you pay down those credit cards and have a cushion to work with in case your employment gets disrupted.
Your Profit Pilot, TG