Final revisions of second quarter GDP indicated the economy grew at the fastest pace in two years. That data however is dated. The Federal Reserve Bank of Atlanta’s GDPNow estimate, however is predicting a 3.3% growth rate in the July-September period. How accurate is this assumption?
As written many times the unexpected is continuing to occur. Why is growth still surprising on the upside and inflation remains locked in a very defined range defying expectations of a tariff induced surge and economic slowdown?
What will be the impact of inventories being depleted? Will there be a price surge as these stores are replaced? Will there be bottlenecks in the supply chain? Will domestic manufacturers produce the goods? Or perhaps more importantly is there the domestic capacity to do so?
Anyone who definitively suggests what may happen tomorrow should be taken at face value at best. The outcomes are unquantifiable given the complete rewriting of the rules that have existed since 1945.
A strong argument can be made that the President is only part of this change, not the catalyst for it. The change commenced during 2008-09 Great Financial Crisis and went on steroids following COVID.
Markets slipped yesterday on the data on valuation on monetary policy worries. Bloomberg writes the S & P 500’s 12 month forward price top earnings ratio is 22.9, a level that this century was exceeded in just two prior instances: the dot com bust and the pandemic rally in the summer of 2020 when the Fed reduced rates to near zero.
The Newswire further states the S & P 500 has never been this concentrated in several companies or one sector. If these approximate 10 companies are not included, valuations are considerably “more reasonable.”
Today is the release of monthly PCE data or the Federal Reserve’s preferred measure of inflation. Pricing pressures are expected to be higher this month as compared to last month’s measure.
Last night the foreign markets were mixed. London was up 0.50%, Paris up 0.62% and Frankfurt up 0.39%. China was down 0.65%, Japan down 0.87% and Hang Seng down 1.35%.
Futures are little change ahead of the PCE data and personal/spending statistics. The 10-year is up 2/32 to yield 4.16%.
