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Weekly Market Minute

The Weekly Market Minute is written by Rank Dawson, Vice President of Research and Strategy, and is published every Wednesday.

A rise in the U.S. dollar typically occurs in periods where the outlook for economic activity is weak.

The U.S. Dollar, using the DXY Index, is up 19% on a year-to-date basis and 27% from its cycle low on January 5th, 2021. As of September 26th, the index is at 113.88, its highest level since May 2002. Source: Macrobond. Listed below are a few callouts to provide global context to the current environment....
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Inflation remains elevated, but there are several indicators that suggest it will likely continue to decelerate on a rate of change basis.

The headline Consumer Price Index number came in at 8.3% y/y for the month of August. While still at elevated absolute levels, it was a rate of change deceleration from 8.5% in July and 9.0% in June. On a m/m basis, CPI accelerated 0.12%, following -0.02% in July. Food prices accelerated 11.4% y/y, but the...
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The increase in European energy prices will likely lead to a slowdown in economic activity.

Most major European economies are facing all-time highs or multi-decade highs in producer and consumer prices. One of the critical developments in recent months is the acceleration of European energy prices. This increase in prices is a double-edged sword. First, higher energy prices increase producer costs, and companies will attempt to pass that cost onto...
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Business sentiment, durable goods order growth, and inventories are reflecting a slowdown in economic activity.

The S&P Global Flash U.S. Composite PMI declined further into contractionary territory in August. The index dropped 2.7 points to 45, down for the fifth consecutive month. This also marks two consecutive months in contractionary territory (below 50), providing more evidence of the previously discussed (July 6, 2022; April 6, 2022) slowdown in economic activity....
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Consumer spending levels have slowed, and inflation adjusted spending is already in-line with prior recessionary periods.

We have been noting a deceleration in consumer spending (June 15, 2022; May 25, 2022) and the negative impact this has been having on economic activity (Q1 and Q2 GDP decelerated to start 2022).  Other sources have been noting that consumer spending is still positive and that this could be suggesting that the economy is...
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Labor market data tends to lag other measures of economic activity, usually hitting their worst levels toward the end or even months after the official end of a recession.

Much of the economic and market commentary in the last month has focused on whether the economy is entering a recession. Specifically, how severe or long a possible recession could be and what that may mean for jobs. We cannot say for certain how any future economic slowdown would impact the current labor market, but...
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Consumer debt has been rising as savings and incomes declined, and credit conditions are starting to tighten alongside rising delinquency rates, which can be a sign that the economic cycle has more downside.

We have written about the slowdown in consumer related economic data multiple times, (May 25, 2022; June 15, 2022; April 6, 2022) driven by a deceleration in real earnings (combination of higher consumer prices and the expiration of fiscal support), leading to a decline in savings rates and an acceleration in consumer credit to try...
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Real GDP contracted for the second consecutive quarter in Q2 leading to a debate over whether or not the economy is in a recession. Historical analysis shows that mild recessions can still have a large impact on corporate profitability and the labor market.

The most recent U.S. real GDP release has created a debate over whether or not the U.S. economy is in a recession and the implications this has on future outcomes.  There have been similar periods that were considered shallow or technical recessions that still experienced sizeable negative outcomes for corporate profits which contributed to weaker...
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Housing market data continued to decline in the most recent round of releases.

Over the last few months, we have been writing about a rising probability that economic growth will slow down on a rate of change basis. The most recent round of housing data releases provided more evidence towards that scenario. The National Association of Home Builder’s Housing Market Index, a leading sentiment indicator for the single-family...
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Inflation is negatively impacting consumer demand which could lead to weaker corporate profitability.

Elevated inflation, particularly in food and energy, is taking up a greater portion of consumers’ disposable income which can lead to a slowdown in overall demand and negatively impact corporate profitability. The Consumer Price Index (CPI) accelerated 9.00% year-over-year in June. This increase was driven primarily by higher food and energy prices. Food prices moved...
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