Q2 GDP just printed and while you can draw some near term conclusions, I’m compelled to push back a bit as I usually do.
Frankly I don’t care about 2.2 v 2.5 v 2.8 right now. As we know this number could be off 1 anyway. We saw 2015 rev up, 2016 and Q1 2017 rev down. Make no mistake, net, this is a bad 2017 report. The combined total of Q1 and Q2 miss, earnings missed, prices missed. The other components were a bit of a mixed bag.
I don’t want to get caught up in the weeds though, I’m a bit more focused on the leaves…Tea leaves. Why? Starbucks is shuttering all their Teavana stores by Q1 2018. Why? Mall traffic or lack thereof. Why does this matter? Well, to TEA (sic) it up for you, here’s a refresher you can catch later:
So why do we care about mall traffic, people are just buying on the web right? I’ve covered this topic before as well, so I’ll keep it short. All commerce isn’t equal. E-commerce clearly has a much smaller eco-system and lower margins. Both equate to a much smaller segment of the population benefitting from an E-tailer’s propriety, versus a brick and mortar shop. The result is an anchor on prices and thus inflation and wages, and oh yes, an extended period of low growth.
If you don’t believe that, check this out:
Therefore, in the near term, I still see the range intact. Who knows if the Fed moves. Maybe we do make a run at 3 before year end as ridiculous as I think that would be. I have difficulty seeing a break above 2.41 in the near term though. We have a ton of data next week, so it makes sense to play it close to the vest until then as you never know, perhaps with a slight bias to lower rates. More importantly, until something big comes along to change things, all I keep seeing is #LowerForLonger. It’s #InTheLeaves
#WhatRecovery #ThingsAren’tBroken #Hashtag