Markets were in a good enough mood as it was without an additional piece of evidence to support the bull case headed into a long holiday weekend in the US.
But, just in case you needed one more incrementally positive data point to round out whatever rationale you’re using to justify your own personal FOMO, University of Michigan sentiment obliged.
The headline gauge rose 8% MoM to 63.9 in the preliminary reading for June, the highest in four months.
Both the expectations and current conditions indexes moved up materially.
Although still subdued by historical standards, sentiment is now nearly 30% from the listless nadir seen last year. But, again, Americans remain concerned about the prospect of “difficult times” ahead, as survey director Joanne Hsu put it Friday.
Better, perhaps, than the headline (which was above the highest estimate from nearly five-dozen economists) was another steep deceleration in year-ahead inflation expectations. That comes with the usual caveat: The Fed cares more about long run expectations than the year-ahead outlook, but they’ll take whatever they can get.
June’s initial 3.3% reading on the near-term gauge came courtesy of a sharp drop from April’s final reading. We’re approaching levels which could be mistaken for something akin to “normal” by late summer.
Expectations on the five- to 10-year measure are still uncomfortably high, at 3%, but that was down a tick from May’s 3.1% (which was itself revised lower from the preliminary reading).
The figures capped a week that found market participants taking a glass half-full approach to May’s CPI report on the way to looking right through a hawkish set of dots from the Fed at June’s “pause” meeting. PPI figures were admittedly favorable for the disinflation case, and another week of elevated jobless claims perhaps suggested the labor market is beginning to soften, while resilient retail sales underscored the notion that a recession isn’t imminent.
It’s not all good news, though. Hsu on Friday said that although sentiment may be poised to “resum[e] its upward trajectory” thanks in part to the clearing of the debt ceiling clouds, “views of consumers’ personal financial situations deteriorated this month, particularly for younger individuals who anticipated worsening unemployment in the year ahead.” Many of those “younger individuals” will also need to budget for the resumption of student loan payments, and if the labor market softens, they won’t be able to demand prospective employers pay those debts off as part of any benefits package.
Glad you mention student debt. For the poorer students, it will be credit card issues and the more well-off it will be a retirement accounts.
Monday I decided to join the party and willy-nilly bought a whole bunch of oversold stocks, and ETFs with no intellectual attachment involved. But my finger is on the trigger for the whole lot of it.
In addition to how the students actually pay back their loans and that impact, based on some rough math resuming student loan payments will take approximately $16-$18 billion out of discretionary spending and saving each month (40-45 million loans at $400 average monthly payment) for these consumers.
And while I don’t have data for this, it’s reasonable to assume that at least meaningful portion of the consumer and retail resiliency is driven by this dynamic; younger consumers are more likely to be out shopping, dining and drinking, traveling (pandemic revenge travel, work from anywhere), etc. Perhaps this is my Chicken Little moment, but I struggle to see how this can’t impact retail sales and consumer behavior broadly.
I used to be in the FOMO camp. Now I’m in the FOLMA camp. 4%-5%, stress-free, is good enough for me…..that might become my new mantra, replacing “Oh shi#, Oh shi#,Oh shi#”.
What does Hartnett’s Bill/Bear indicator say?
3.6, still in (modest) ‘Buy’ territory on slower inflows to risky bonds.
The bull is alive but the VIX is dead. Take a look at the chart of VXX. Something seems out of whack. Even a bull market needs a little volatility. The CNN Fear & Greed index is in “extreme greed” territory. We have fuel and oxygen, now waiting for a source of ignition.