The Single Largest Driver of the US Economy is About to Collapse
The markets continue their dead cat bounce while the economic data worsens.
First quarter US GDP was revised down from an annual rate of 2.4% to 1.8%. The drop was due to lower personal consumption expenditures than initially forecast.
This is the crux of the US’s current economic woes: consumer-spending accounts for roughly 70% of our GDP. And QE does nothing to help incomes, which drive consumption.
The US Federal Government has subsidized a weak economic recovery via food stamps and other social program, but the private sector is lagging with most of its hiring coming in the form of temporary or part-time jobs.
The Wall Street Journal ran this graphic yesterday. Anyone who is banking on consumers to continue spending as they have is out of their mind.
Regarding the stock market, it’s important to note that all market collapses follow a similar pattern of:
1) The initial drop breaking support
2) Bouncing to re-test support
3) The larger drop
The S&P 500 has completed #1 and is now in #2:
This move could take us as high as 1,625. However, if the market fails to reclaim its trendline we’re going down as far as 1,500 in short notice. And if we take out that level we’re in BIG TROUBLE.
If you have not taken steps to prepare for a market collapse, we have a FREE Special Report that outlines how to prepare your portfolio. To pick up a copy, swing by:
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