We’re now facing a new challenge in the U.S. economy.
Americans are starting to run out of money.
Which means consumerism is facing a big wall later this year.
Today, I want to highlight the current market…
But then turn my attention toward the fourth quarter.
Let’s dig in.
We Have Problems
Inflation isn’t going away. Politicians blame grocery stores, restaurants and gas stations for rising inflation. They ignore that these three sectors are very low-margin businesses. They need to assign inflation where it is…
The Federal Reserve has said it will likely raise interest rates at least twice more in this cycle, but the markets don’t want to believe Chair Jerome Powell. I’ve said this multiple times over the last 18 months...
The Fed is not bluffing.
One must understand the looming threat and how to properly measure it over the last two years to see what the Fed sees.
Look at the eye-popping numbers of inflation that happened during the first half of 2022. When we measure year-over-year inflation, the numbers from May and June look tame. The problem starts when we look out toward the end of the year when we see September 2022 inflation measures compared to September 2023.
The year-over-year figures could be much higher from here. This is one reason we expect the Fed to raise rates at least twice (if not more).
Bank of America lists a variety of possible outcomes depending on month-over-month prices starting in July. Check it out.
While there’s a baseline for inflation to hit the Fed’s target later this year before rebounding, there’s also the chance that monthly upticks slingshot us higher yet again into the start of 2024 – all while inflationary odds remain at “damn certain” levels for next year.
Government continues to spend at a breakneck pace. We’ve already added hundreds of billions of dollars in new debt and spending. That’s not going away. So, while the government spends… with Americans?
That’s where the questions really start for the second half of the year.
So Now What?
Consumers are hitting a wall. And people might get lulled into a false sense of security. Since the bulk of inflation came on in the first half of 2022, we saw a pullback in the rate over the last few months.
That could return soon.
What would stop that rush of inflation?
Consumers are pulling back.
A new survey by ScoreSense shows that Americans are canceling vacations and other plans. The survey shows that 50% of respondents plan to cancel or delay vacations due to financial problems.
Also, 33% said they’d spend less money on vacations this year. A total of 53% said they’re planning a trip that costs less than $2,000.
That’s not the problem. Inflation is the biggest cause of stress in people’s lives, says Fidelity.
As Americans continue to bang their heads against the walls over costs, they will go from spending too much money (because their money is worth less than what it was last year), to spending… less.
A wall is coming — and investors need to be very cautious as we head into the fourth quarter of the year. Government spending can’t keep GDP up on its own, but it certainly can push prices higher.
We are heading toward stagflation at a breakneck pace.
We’ll talk about what you need to do to protect yourself — focus on the long term — all this week.
To your wealth,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
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Market Momentum is YELLOW
Momentum is under pressure. The Nasdaq fell Monday. Momentum started breaking down last week, and we are still in a difficult environment. I’m expecting a shift in sentiment that fuels a broader sell-off. Now is not the time to be worried about the short-term. Instead, we’re focused on long-term investing with Tactical Wealth Investor. I’ll be making my newest monthly recommendation on July 5. Now is the time to join and take advantage of this market’s weakness.
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
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