To The Moon

Its October 2023 and US market has just started its Q4 2023 journey.

Since the beginning of this year, analysts have forewarned about US economy slipping into a recession as the central bank continued with interest hike from February 2023.

The narrative changed when that did not happen (see above).

With many diverse opinions swirling on the internet, things got a bit muddled.

The question — “Is the US heading into recession ?” is something that I am very interested to confirm.

This is because it will affect US stock market that will, in turn affect individual stock / company.

• Latest Consumer Price Index (CPI) monthly chart released on 13 Sep 2023, showed an “increase” in monthly inflation of +0.4% (in August 2023) versus July’s +0.2%.

• The spike (we all know) was large due to oil prices hoovering around the $90 per barrel resistant level.

• Looking at August 2023’s Core CPI report it painted a slightly different story (see below).

• Core CPI report excludes (a) food and (b) energy prices from the data set.

• Looking at the above chart, conclusion is “core inflation” rose by the smallest amount in 2023 and also nearly three years.

• This also implies that inflation pressures continue to ease.

• It is a fact that the Fed pays closer attention to “core” prices that they consider a “better” gauge of where inflation might be headed.

• Based on latest report / data, Wall Street again is hoping that modest rise in core inflation is sufficient an alibi for the Fed to leave interest rates unchanged at its next Oct. 31-Nov. 1 meeting.

• The University of Michigan Consumer Sentiment Index (UMCSI) measures consumers' attitudes and expectations about the US economy and their own financial situation.

• For September 2023, UMCSI was 68.1, down slightly from August’s 69.5.

• Indicating that consumers are cautious about the economy recovering, given the possible headwinds — [a] government shutdown in 45 days time, [b] enlarged labor disputes in Auto industry, and [c] persistent inflation after 11 interest hikes.

How I See The Current Situation:

• Continuous rising oil prices will continue to erode US citizens’ income.

• Combination of [a] higher oil prices and [b] modest income growth could weaken consumer spending in the months ahead.

• US Gross Domestic Product (GDP) for Q2 2023 (2nd estimates) was a healthy “2.1%” supported by consumer’s confidence & spending.

• Taking abovementioned concerns and “real” reduction in income into considerations, going into Q4 2023 might be the start of a slowdown in consumers’ spending.

• Not forgetting that student loans repayment is restarting, further curtailing consumers with student loans amounting to US$1.77 Trillion.

• On Fri, 29 Sep 2023, the Core Personal Consumption Expenditure (Core PCE) report was released.

• August 2023 core PCE came in at 3.9%, down -0.4% from July’s 4.3%.

• Hopefully the latest data assures the Fed, their actions to bring inflation back to “2%” without driving up unemployment or causing deep recession (as feared) is working.

Based on EY Senior Economist Ms Lydia Boussour feedback, “high frequency of official reports released, indicates the US economy is experiencing:

• A controlled landing.

• With healthy but cooling labor market conditions.

• Moderating wage growth.

• Increasingly conservative consumer and business spending,

With real GDP on track to grow robustly in Q3 2023, a recession is not on the near-term horizon, but the economy faces imminent risks.

The “risks” mentioned stems from the Economic Forecast released by the Fed on 20 Sep 2023 (see below).

• By end 2024, the Fed sees only a small rise in unemployment.

• Jobless rate rises from current 3.8% to 4.1% (still low actually).

• Core PCE falls to 2.6%.

• Strangely enough, Wall Street sees Core Inflation falls to 3.7% by year end and at the same time hoped that US central bank will not further raise interest rate in 2023.

“Soft landing” a term used so often by Mr Powell where inflation would fall back to the Fed’s 2% target without a deep recession — have been gaining traction in recent weeks.

The last-minute deal secured by the House of Representatives gives the Biden government a 45-days leeway to firm up its budget; averted the disaster of a larger portion of US government shutting down.

On Thu, 28 Sep 2023, president of Federal Reserve Bank of Chicago, Austan Goolsbee, postulated that US economy could head into “golden path”, that is “lower inflation without a recession” might still be possible.

Should the current Fed team succeed in defeating inflation without tanking US economy, this rare achievement in the history of central banks, — the golden path will be studied for years.

Conversely the opposite of “the golden path” could also be case study for what not to do for many years,

In case you are interested, my other “PICK” posts. Enjoy:

• Xpev, Nio, Chpt - Top 3 EVs must buy in Q4 2023. Click here! to read & “like” ok. Tks.

• Cathie Wood ETF ARKK out of top 15. Sell? Read & decide. Click here! to read & “Like”. Tks.

• US Mkt ends Sep '23 on low. NIO, buy the rumours? Click here!. Give a “like” ok. Thanks.

• Do you think the Fed will hike interest rate one more time before end of 2023?

• Do you think the US economy will (a) slip into recession, (b) achieve soft landing or (c) embark on the golden path?

Please give a “LIKe”, “Share” and “Re-post” ok. Thanks. Rating is very important (to me).

Do consider “Follow me” and get firsthand read of my daily new post/s ok. Thanks.

@Daily_Discussion

@TigerPM

@TigerStars

@Tiger_SG

@TigerEvents