US Weekly Fundamental Recap & macro thoughts - Jan 15
Let’s take a look at some data from this last week. In summary:
- CPI continued to inch lower (7.1 to 6.5)
- Unemployment claims remained static (~200k)
- Consumer sentiment on the rise (59.7 to 64.6)
- S&P held around 4k for the close of the week and seems to be starting off strong with further pullback on the US dollar.
Keep in mind interest rates remain high, along with inflation though we are seeing some progress. Lets look at some other important factors to consider relating to high interest rates. We will be here a while, right?
The state of the overall economy: If the economy is strong, businesses and consumers may be more likely to continue spending and borrowing despite higher interest rates.
- Consumer spending is holding, but consumer debt is on the rise. If debt continues to increase / remain high, that we should see consumer spending decline. The leading indicator is there..
The level of inflation: Higher interest rates are often used as a tool to combat inflation, so if inflation is already high, the impact of higher interest rates on the economy may be less severe.
- Inflation remains high, meaning we should see less effect on the economy oooor, it just takes a little longer to grip. I believe that’s where we are sitting. The wait..
The level of consumer and business confidence: If consumers and businesses are confident in the economy, they may be more likely to continue spending and borrowing despite higher interest rates.
- Consumer confidence is low but picking up. Why is this? My thoughts are because we still have jobs, inflation is coming down and the majority still have money to spend. Though if debt continues to rise – that will change.
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The level of consumer debt: Higher interest rates can make it more expensive for consumers to carry debt, which can lead to a decrease in consumer spending and potentially increase in defaults.
- When the Federal Reserve raises the federal funds rate, it generally leads to an increase in interest rates for credit cards. This is because as the cost of borrowing money goes up for banks, they will pass on the increased cost to consumers in the form of higher interest rates on credit card loans.
- It's important to note that credit card interest rates are also affected by the overall level of demand for credit, the creditworthiness of borrowers, the level of competition among credit card issuers, and other factors. So, there is no a direct relationship between the federal funds rate and credit card interest rates, but the later one may be affected by the former.
The level of international trade: Higher interest rates can make a country's exports more expensive, which can decrease demand for them, and in turn, negatively impact the labor market.
- Exports remain steady into 2022 – with the US dollar weakening, this could help ease some of the pain felt from higher interest rates
The level of government spending: Government spending can act as a buffer to the negative impact of higher interest rates on the economy.
- Well, we are raising the debt ceiling, again. Spending remains relatively flat by the big cats.
The level of interest rates relative to other countries: Higher interest rates in one country can make its assets less attractive to foreign investors, potentially leading to a decrease in capital inflows, a stronger currency and a decrease in exports.
- We have seen decline in investor debt – does this mean more investment or mless? I honestly don’t know.. But there it is.
My Conclusion: We are in interesting times, currently some major drivers are either static or improving. But the rates remain high – and will stay high, manufacturing indexes and housing prices continue to fall. These are leading me to believe that we could still see some lagging indicators to sag. Unless there is drastic news – the stock market should not see any major decline. S&P/NAS may inch higher this week. Looking ahead – the spoken words will be the most influential – time to listen.
- CPI continued to inch lower (7.1 to 6.5)
- Unemployment claims remained static (~200k)
- Consumer sentiment on the rise (59.7 to 64.6)
- S&P held around 4k for the close of the week and seems to be starting off strong with further pullback on the US dollar.
Keep in mind interest rates remain high, along with inflation though we are seeing some progress. Lets look at some other important factors to consider relating to high interest rates. We will be here a while, right?
The state of the overall economy: If the economy is strong, businesses and consumers may be more likely to continue spending and borrowing despite higher interest rates.
- Consumer spending is holding, but consumer debt is on the rise. If debt continues to increase / remain high, that we should see consumer spending decline. The leading indicator is there..
The level of inflation: Higher interest rates are often used as a tool to combat inflation, so if inflation is already high, the impact of higher interest rates on the economy may be less severe.
- Inflation remains high, meaning we should see less effect on the economy oooor, it just takes a little longer to grip. I believe that’s where we are sitting. The wait..
The level of consumer and business confidence: If consumers and businesses are confident in the economy, they may be more likely to continue spending and borrowing despite higher interest rates.
- Consumer confidence is low but picking up. Why is this? My thoughts are because we still have jobs, inflation is coming down and the majority still have money to spend. Though if debt continues to rise – that will change.
-
The level of consumer debt: Higher interest rates can make it more expensive for consumers to carry debt, which can lead to a decrease in consumer spending and potentially increase in defaults.
- When the Federal Reserve raises the federal funds rate, it generally leads to an increase in interest rates for credit cards. This is because as the cost of borrowing money goes up for banks, they will pass on the increased cost to consumers in the form of higher interest rates on credit card loans.
- It's important to note that credit card interest rates are also affected by the overall level of demand for credit, the creditworthiness of borrowers, the level of competition among credit card issuers, and other factors. So, there is no a direct relationship between the federal funds rate and credit card interest rates, but the later one may be affected by the former.
The level of international trade: Higher interest rates can make a country's exports more expensive, which can decrease demand for them, and in turn, negatively impact the labor market.
- Exports remain steady into 2022 – with the US dollar weakening, this could help ease some of the pain felt from higher interest rates
The level of government spending: Government spending can act as a buffer to the negative impact of higher interest rates on the economy.
- Well, we are raising the debt ceiling, again. Spending remains relatively flat by the big cats.
The level of interest rates relative to other countries: Higher interest rates in one country can make its assets less attractive to foreign investors, potentially leading to a decrease in capital inflows, a stronger currency and a decrease in exports.
- We have seen decline in investor debt – does this mean more investment or mless? I honestly don’t know.. But there it is.
My Conclusion: We are in interesting times, currently some major drivers are either static or improving. But the rates remain high – and will stay high, manufacturing indexes and housing prices continue to fall. These are leading me to believe that we could still see some lagging indicators to sag. Unless there is drastic news – the stock market should not see any major decline. S&P/NAS may inch higher this week. Looking ahead – the spoken words will be the most influential – time to listen.
