Presenting Economic Reality
Following today's disappointing jobs data, we thought it useful to reflect on the sad reality that is occurring under the eyes of AAPL Mr. Market. As BofAML notes this morning, their Economic Data Diffusion index (which tracks macro data surprises) has been trending lower for over a month (indicating a trend of data missing expectations to the downside) and, more importantly has turned absolutely negative (indicating a marginally negative bias to the overall economic data expectations). Following our lead, they note the weather's impact and that this is likely to be the third time in this recovery that the markets and economic consensus has over-reacted to positive news and become too optimistic about growth. Looking ahead, we expect this data downshift to continue. In the near term, both higher gasoline prices and the fading weather effect will likely weigh on growth and, over the course of the second half, we expect the looming fiscal cliff to undercut confidence and growth. Party's ending, a tough economic reality is looming and the punchbowl remains out of sight for now.