Submitted by Rodrigo Serrano of Rational Capitalist Speculator
Weekly Bull/Bear Recap: June 20-24, 2011
+ The US Gov’t is taking action and is attacking the greatest threat to consumer spending today. Falling gas prices, over
the course of the summer, will positively catapult consumer confidence
heading into the second half of the year. With this week’s leg lower in
oil, expect their continued fall to be a growing tailwind for consumer
+ Home prices are showing signs of firming as the FHFA House Price Index rises 0.8% in April. This along with lower gas prices will give life to the consumer in Q3.
+ Durable Goods Orders, ex-trans, more than made up for last month’s loss of -0.4% (revised from -1.4%), rising 0.6% for the month of May.
The economy is stronger than many people think. The
Japanese earthquake profoundly disrupted global supply chains,
while higher gas prices somewhat deterred consumers. Those headwinds
are in the rearview mirror. Improvement in economic indicators will be a
theme in the next couple of months.
+ Greece’s gov’t survives the Confidence Vote. The EU and IMF approve
the country’s austerity plan. This sets the stage for additional aid
in the coming months. Approval of this aid will eliminate a large
uncertainty from the business climate, confidence will return, and will
set the stage for a second half rebound in global economic growth.
+ The Yuan continues to strengthen
against the dollar and is a necessary step for the global economic
re-balancing to take place. Chinese officials understand that the ball
is in their court and are taking action.
- Jobless Claims show a weak labor market. As long as they’re weak, don’t count on consumer confidence making a strong comeback anytime soon. A weak labor market leading to subdued confidence = weak consumption = weak labor market. A negative feedback loop plagues the US economy.
- We’re deep into the home-buying season, but from the looks for the data, you’d think we were smack in the middle of winter. Existing home-sales fall 3.8% in May (to a 6 month low), while months supply rose to 9.3 months from 9. New home sales, which are undeniably more important to the economy, also fared poorly.
- The global recovery is stalling. According to the recently released HSBC Flash Purchasing Manager’s Index, China is only 0.1 pts from outright contraction. With another interest rate hike around the corner,
the engine of the global recovery may shut down quickly. Meanwhile
the Eurozone, in addition to its sovereign debt woes, is dealing with an
abrupt slowing in economic growth.
- The Architectural Billings Index, a leading indicator for commercial real estate construction is turning back down and mirrors many other economic indicators over the past month. Are we really in just a soft patch? We’ll find out shortly.
- Protectionism: Coming soon to a news headline near you.