A Bull Market to Emerge?
Macro Perspectives
The Conference Board’s Leading Economic Index (LEI) report released last week: “weakness among the index’s components were widespread in March and have been so over the past six months. The Conference Board forecasts that economic weakness will intensify and spread more widely throughout the U.S. economy over the coming months, leading to a recession starting in mid-2023.”
Citigroup tracks the difference between reported and expected economic results. When reported results are better than expected, economic performance generally beats market expectations. The Citi Economic Surprise Index shows actual results have been surprising to the upside - the economy is not in a much-anticipated recession.
Lately, even inflation data has been surprisingly good (lower than expected).
Why is the economy so resilient?
Roughly 70% of U.S. economic activity is driven by consumers who have lots of money saved, low debt service and are employed. Additionally, their home and stock values are in good shape.
Consumer confidence and spending patterns can change quickly. The University of Michigan consumer sentiment survey shows sentiment is well below average and the Association of American Independent Investors shows bearishness has been higher than the historical average all year. Yet even with a bearish mind set, consumers are spending and the economy is expanding. From a bearish stance, the next move is a shift towards bullish.
If this keeps up, a real bull market may emerge.
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