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PPI inflation comes in hot … the Red Sea problem isn’t getting better … Louis Navellier is bullish on oil … yesterday’s bad retail sales report … is the U.S. consumer finally cracking?
It’s a busy news cycle. Let’s bounce around to a handful of stories likely impacting your portfolio.
Today’s Producer Price Index (PPI) disappoints
As we covered in the Digest on Tuesday, January’s CPI number came in above forecasts, resulting in a heavy down day on Wall Street. The selling pressure was due to fears that the hotter-than-expected CPI data would cause the Federal Reserve to delay its initial rate cut, while potentially cutting rates fewer times in 2024.
The hope was that today’s Producer Price Index (PPI) print would be more encouraging, giving the Federal Reserve members the “cool” data that they’re looking for. Instead, the number also came in higher than expected.
Red Sea troubles impacting consumer goods prices
As we’ve been reporting in the Digest, Houthi rebels have continued their missile-strikes on ships in the Red Sea, disrupting one of the world’s busiest trade routes. Since November, the Houthis have attacked or threatened commercial ships at least 46 times, according to U.S. defense data.
This is a major problem for global commerce since the Red Sea is the only route to the Suez Canal (from Asia) and is a lifeblood for trade connecting Europe and the East. About 12% of global trade comes through the canal, which represents approximately 30% of all global container traffic.
Investing in oil amid the turmoil
One week ago today, we analyzed the oil market with the help of our macro expert Eric Fry. Our conclusion was oil and energy stocks appear attractive for a trade – both on a shorter-term basis (as we head toward the summer) and a longer-term basis (as supply shocks hit the market by 2025).
Well, oil keeps climbing, and legendary investor Louis Navellier is feeling bullish about his Big Energy Bet.
Speaking of inflation, keep your eye on continuing problems in the Red Sea and its impact on consumer goods prices
Looming Storm for U.S. Consumer as Retail Sales Disappoint and Debt Balances Soar
Phillips 66 Stands Out Amidst Downturn in Energy Stocks
With the recent tumult in the energy sector, Phillips 66 remains a standout as the only stock with an active “buy” status by the esteemed Portfolio Grader. While the energy market is experiencing significant fluctuations, this isolated “buy” rating stands as a testament to the company’s resilience amidst the chaos.
The Retail Sales Report Sends Shockwaves
The U.S. consumer market received a jolt with yesterday’s disheartening retail sales report, signaling potential vulnerabilities in the much-touted resilience of the American consumer. According to data from the Census Bureau, advance retail sales plummeted by 0.8% in January, following a downwardly revised 0.4% gain in December. This figure surpassed economists’ projections, indicating a steeper decline than anticipated, even excluding auto sales. Louis Navellier, in a Special Market Update podcast, expressed his disappointment, attributing the weak consumer spending to post-holiday blues.
Louis expressed a sliver of optimism in this dismal scenario, suggesting that the faltering retail sales could provide the Federal Reserve with the impetus to consider a rate cut. This perspective underscores a silver lining in the prevailing market chaos, hinting at the potential for a positive ripple effect amidst the turmoil.
Consumer Debt Reaches Alarming Heights
In parallel to the retail sales debacle, recent data on consumer debt has raised further concerns about the financial health of the U.S. consumer. Research from TransUnion revealed a staggering 10% surge in credit card balances compared to the previous year, reaching a record average high of $6,360. This worrying trend is compounded by a growing inability among Americans to pay off their monthly credit card balances, as well as a surge in delinquency rates according to the New York Fed and TransUnion. The gravity of the situation is underscored by the highest level of “serious delinquencies” in over a decade.
Given these troubling statistics, the possibility of the Federal Reserve implementing an interest rate cut gains momentum. The shifting financial landscape has set the stage for a nail-biting finish: will a rate reduction offer relief to consumers grappling with exorbitant credit card interest rates and mounting balances, or will persisting inflation data delay this much-needed respite, prompting a sharp decline in consumer spending?
Amidst these converging challenges, the U.S. consumer faces an uncertain future, encapsulating a perfect storm of economic pressures and mounting financial burdens.
Stay Informed for Insights and Updates
In these turbulent times, it is crucial to stay abreast of evolving market trends and economic indicators. With ongoing coverage, we aim to provide valuable insights into these compelling narratives unfolding within the financial landscape. Your understanding and awareness are critical in navigating these unpredictable conditions.
As events continue to unfold, we pledge to keep you informed, offering unparalleled analysis and guiding you through the tumultuous financial storms that define our era.
