OK, I don’t mean this literally.
I just couldn’t come up with a better title. That being said, I think in spirit it has a basis in reality. First point, 2016 GDP is now tracking to the worst(-ish) level since 2009, with inflation in check I might add:
|Year||GDP Growth Rate||Inflation|
Next, job growth is slowing.
I posted on this a few weeks ago, no reason to rehash that.
Therefore, what are we hanging on hats on? Why would 2017 prospective rate hikes be any more probable versus that in 2016 following the Dec 15 hike? If the consumer is really jamming on the brakes, what are companies going to do with the capital expenditure and inventory growth that propped up these Quarter 4 numbers? I could really see an “Oh No” moment for some companies if spending and consumption doesn’t pick up and fast.
I’m going to make a call here as I have been known to do in the past (quite successfully I might add). I could make a very strong argument that a swing in the other direction could occur fairly violently in Quarter 1 or 2 if sales do not validate some of the investment that business made in late ’16 before the bottom fell out of spending.
Further, I perceive capital expenditure and inventory growth as backward looking, not forward looking as most do. I understand that may seem backwards, but here’s my logic:
I don’t believe that most businesses are run properly or efficiently. Therefore, they are generally behind the curve, not ahead of it. They were behind the curve in terms of bulking up and now they are behind the curve in terms of trimming down. I think its safe to say that you can float some bloat when the register is ringing, but it’s not so easy when it’s not.
I’d keep a keen eye on sales the next several month. I know I’m an ISM guy, but I think sales is our ticket to getting ahead of the market this year.
#whatrecovery #lowerforlonger #forget2%howabouta1handle!?! #floatsomebloat #sellingismybusinessandbusinessismeh
PS, Just broke 2.50. TBAs up as much as 5+ ticks, so gaining some speed. Those who floated on my email from Wednesday, and I know many did based on emails, woohooo, but don’t get greedy!! We still have jobs data next week.