US Macro Economic Update
Its been several months since I wrote about the Macro Economic situation in the USA
Trump has been in office less than 50-days and suddenly there is talk of lots of recession in the air, on the TV shows. Its not secret that he was created decades of changes within those 50ish days. Striking heavily at the Government sector which accounted for nearly 100% of all job growth over the past 4-years. Surely, upending lifestyles and spending habits at home and abroad.
Top Macro news from the past week
Recall 70% of the USA GDP is derived from consumer spending. Hoe healthy is that consumer?
- Subprime Auto Loan Delinquencies Hit Record High In January. Delinquencies for at least 60 days past due on their loans hit 6.6% in January, the highest in at least 30 years. Let that fact settle in highest in 30-years back to the start of the Internet craze.
- The Atlanta Fed just revised its output forecast for the first quarter to expect a contraction at -2.8%
- USA Household Debt Hits $18.04 Trillion, most of this sits on credit cards with an average of 28+% interest rate. Yeah that's not good at all!
- US Equity markets have been whipsawed w/ brutal volatility over the past 3-weeks
- No matter how you slice and dice the valuation of the markets, it would be pretty easy to make the case for an equity market drawdown of as much as 40% without trying too hard or being too sensationalist.
- US employees tapping 401(k) for hardship loans are up to 12%. Not a good sign for anyone
- US is on track to set a new record in homeless people, according to the WSJ with over 650,000 people living on the streets.
- We have not even begun to see the US consumer start to deleverage to lean down their home budgets (harken back to 2008/2009/2010).
- Yeah, I am probably overlooking a ton of other macro reports but the picture is bleak and I expect it to get worse before it gets better.
What if we are experiencing the very early stages of a dramatic realignment of the global economy?
The USA pulling back to rebuild industrial base for a modern globally competitive environment, spending less money abroad on endless military conflicts, which could be leaving a void for one of the two global super powers (China & Russia) to fill. This leaves lots of room for unintended consequences. As well as possibilities for other emerging market countries to step up and become the new shining star. Remember money flows to where it is treated best!
What we know is coming:
- Possible hardships are certain - check
- Indications of accelerating deglobalization - check
- Loss of Gov employment - check
- Tax cuts are possible for working Americans
- Despite the volatility that we’ve already experienced, I suspect that we Ain’t Seen Nothing Yet!
Summary
The hidden sufferings of the past four years have been largely untold and hence the suddenly announced tribulations of the present moment are likely exaggerated. So the reality is probably somewhere in the middle of the pendulum.
Disclaimer - I am NOT a financial advisor, nor is this financial advise. IF you construe it as such you need to up your meds!
Credit - Blog picture 'thedeepdive.ca' - ALL RIGHTS REMAIN!
