The horizon continues to darken for the US economy and stock market.
US Retail Sales have had zero growth over the past three months and that is the most recent result for September as well. Zero.
Of even greater concern remains US consumer confidence. The University of Michigan Consumer Sentiment Index had a small bounce to 59.6 in October. What this series has been screaming for many months now is quite simply recession. Risk Depression.
US consumer confidence has been lower than it was during the worst of the GFC.
Even now, after a small bounce, it is still at the lows of that period. Remember how depressed the USA was then? Well, this is worse. Manufacturing, services and retail sales are all weakening and the bottom of this severe economic slow-down is nowhere in sight. As is the case for the global slowdown.
This is not an environment in which to be long equities.
This is even before we factor in the sentiment impact of ongoing Federal Reserve rate hikes, and the rolling over into decline of US property prices.
The outlook is grim. The economic horizon is dark.
US Consumer Confidence and Retail Sales data on Friday confirmed a serious and entrenched slowdown for the US economy for the rest of this year and extensively through 2023.
The USA is already in a technical recession and this could well become prolonged as the slowdown becomes more broad-based across the economy.
US stocks could well fall a further 20%, and the price action of the past week is nothing short of a crisis for the many proponents of the ‘buy the dip’ cult.
The US dollar will continue to strengthen for the moment, particularly against other western currencies, but watch for Asian currencies to soon break free of this year’s buy US dollars euphoria.
The US dollar may be a safe haven and the yield may be attractive and going higher. Yet, the economy itself is in a diabolical state and only likely to worsen as the Fed and the White House continue to oddly proclaim that same economy to be strong. This makes any policy response to soften the economic landing, a rather unlikely affair.
This only adds further to our concerns for the once-great US economy into 2023/25.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities