Today, the University of Michigan measure of US consumer sentiment for July came in at 73.2 versus the consensus expectation of 79. This was the largest negative surprise on record, and it's going to have a big negative effect on the consumer discretionary sector. And what's bad for retail is also bad for banks, as CMBS delinquency reached 10.32%. We also got a large negative surprise on housing starts today, up only 2.1% vs. the 4.9% consensus expectation. Home building has been the one bright spot in the economy as Americans flee the cities for the suburbs, so this is a concerning deterioration in that market. The ECRI leading index has been flattening, and mobility is falling as scared consumers remain at home even in states that haven't reclosed. California's reclosure this week was a huge deal, since the state accounts for nearly 15% of US GDP.
Consumer confidence chart:
Meanwhile, the Fed's grew this week for the first time in four weeks, which means that liquidity-- and the accompanying asset price inflation-- is on the upswing again. Congress is actively working on as much as $3.5 trillion in new stimulus, and Lael Brainard of the is signaling that the Fed may get more aggressive about trying to hit its 2% target, even to the point of "overshooting" that target to make up for years of weak . (Current CPI is about 1.2%.)
See Brainard's remarks here:
With economic data starting to sour, I don't really want to be in equities. But with more liquidity coming, I don't really want to be out of equities, either. My solution is to hide out in metals and consumer staples. A fall-off in mobility will be bad for nearly every sector of the economy, but it should be for consumer staples and grocery store stocks, some of which report in the next few weeks. That makes the consumer staples sector a natural safe haven as California recloses and frightened consumers stay home. Consumer staples also pay dividends, and they're a little more reasonably valued than technology, which is the other sector that might conceivably benefit from reclosing. As you can see on the chart, staples recently made a break (which I alerted before it happened), and they have continued to strengthen since.