The “Lion’s” Share of US Economy is Consumer Spending
$DIA, $SPY, $QQQ, $VXX
“When the dust settles on Brexit, it will be consumer spending that will determine the course of the U.S. economy and we need to wait a while before we know what consumers are thinking.” — Joel Naroff, economist
Mr. Naroff means: The news is all about Brexit and while the uncertainty it has created will likely dominate discussions in nere, ultimately, the US economy will rise and fall on its ability to withstand whatever shocks may come. The impact on the real economy may not be great, even if the financial economy takes some hits.
The fallout will come with Consumer Confidence if the US stock market does not bounce back quickly.
The Conference Board’s reading of household confidence rose sharply in June as expectations of the future as well as views of current conditions increased.
The respondents’ views on business conditions were positive and they expect the labor market to get better going forward.
This report, however, is in conflict with the University of Michigan’s June Consumer Sentiment Index (MSI), which fell. It also was taken before the Brexit impacts on the markets happened. So, it will take some time to know if US consumers are feeling good enough to keep spending.
US GDP in q-4 of Y 2015 and Q-1 of Y 2016 was anemic, Q-1 GDP was revised to 1.1% from 0.8% Tuesday.
The S&P/Case-Shiller 20-City Survey seasonally adjusted national index edged a bit higher but the increase over the year moderated.
The major data is ahead: June NFPs come on 8 July, until then the financial markets will probably continue to be focused with the Brexit issue.
And as we know too well it is uncertainty, not reality, that drive markets.
What happens to the British economy matters, but not a lot given that US exports to the UK in Y 2015 of $56.4-B represented only 0.3% of total GDP.
The real concern is what this means for the EU.
Exports to the EU were 5X greater than to the UK and that is why there is uncertainty in here. No one knows if this is a 1-off issue or if other nations will follow Great Britain and choose to opt out of the 28 nation single currency bloc
For the US Fed: the Brexit issue bolsters the argument that the FOMC needs some tools if it is to be in position to deal with the shocks that occur throughout the world. Some of us see the Fed coming with another stimulus action, a rate reduction or QE program.
Tuesday, the US major stock market indexes finished at: DJIA +269.48 at 17409.72, NAS Comp +97.42 at 4691.86, S&P 500+35.55 at 2036.09
Volume: Trade was heavy with over 1-B/shares exchanged on the NYSE
- NAS Comp -6.3% YTD
- Russell 2000 -2.6% YTD
- S&P 500 -0.4% YTD
- DJIA -0.1% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Neutral (-0.15)||Neutral (-0.19)||Bearish (-0.29)||Neutral (0.0|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Neutral (-0.16)||Neutral (-0.06)||Bearish (-0.44)||Neutral (0.01|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Neutral (-0.19)||Neutral (-0.10)||Bearish (-0.27)||Neutral (-0.19)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Neutral (-0.12)||Neutral (-0.21)||Neutral (0.06)||Neutral (-0.21)|