Hey There Income Hunter,
Green across the board last week …
Stocks were boosted on Friday by positive CitiGroup earnings and lower inflation expectations reported in the University of Michigan survey.
This week, the earnings calendar gets serious with over 320 companies reporting.
Today, I’ll lay out the important real-time data that you need to be mindful of …
Small Business Outlook
The Fed continues to point towards employment as the pillar that will hold up the economy.
But in reality employment is a lagging indicator
Plus nearly half the employment in the US is hired by small businesses, and judging by the data out this week (chart below) employment will get much worse in the weeks ahead.
The above data goes back to the early 1970s. The US economy slammed on the brakes in May and now broad based demand appears to be rolling over hard again.
Now sma businesses have the worst outlook since the early 70s..
As you can see in the next chart, these collapses are also happening globally, which makes sense with an accelerating energy crisis happening in Europe and Japan.
Strong Dollar Hurting Global Tech
The earnings outlook for US multinationals is shrinking fast as the strong USD is likely going to weigh significantly on S&P 500 earnings in second half of 2022, if the historical correlations shown below hold …
The increase in the dollar is inverted (right scale) to match the S&P earnings revisions breadth (left scale):
When multinational company earnings fall, those companies typically cut jobs and are a leading indicator for rising unemployment.
Housing Inventory Spiking Higher
There has been a big increase in homes listed in the once super-hot real estate markets
San Diego:+144% from low in December
Las Vegas: +245% from the low in February
Denver: +412% from low in January ‘22
The overall listings inventory is finally rising (chart below)
US housing is a key driver to the US economy, and a leading indicator of US GDP. It is likely going to be obvious in coming weeks that the US is moving toward a hard landing in the back half of the year.
Bring It Home
The US economic data is likely going to weaken more than expected in the coming weeks.
Friday’s rally presented a good opportunity to set up bearish strategies for as earnings tell the real story.
I used the rally Friday to buy a put spread on the SPDR S&P 500 ETF (SPY) and also on the iShares High Yield Corporate Bond ETF (HYG) …
It would take a close, on better than average volume, above 390 in SPY for me to consider stopping myself out on the trades.
Have a great week and as always …
Live and Trade With Passion My Friend,
Griff