SVET Markets Weekly Update (September 26, 2022)

27 Sep 2022 by rate3

The week after FOMC meeting is usually not so exiting as the preceding one. We will see a couple of newsworthy lagging macroeconomic indicators updates coming from the Census Bureau (CB) at Tuesday — on Durable Goods Orders and New Home Sales both for August. It is followed by Bureau of Economic Analysis (BEA) releasing its estimates on Personal Income and Spending in August on Friday.

Media reported that the previous (July) Monthly Manufacturers Shipments, Inventories and Orders report (full name of the Durable Goods Orders report) showed no increase. Actually, according to data published on CB site, there was a slight decrease registered — from 273523 to 273476 orders. However, all changes lower than 0.1 percent are usually disregarded.

Overall, the Orders dynamic reflects manufacturers up-and-down changing expectations towards the economic prospects since the beginning of 2022.

It stood at 264356 order in January 2022 after rising from 256464 (1.6 percent) in Dec 2021 on increased optimism that FED might not be so hawkish as was previously anticipated. That hope was battered in February following the political tensions preceding the Ukraine war, when orders fall sharply to 262494 (minus 1.7 percent).

After the initial shock dissipated US producers (together with the of rest of markets participants) had recovered their usual optimism and as a result Orders rose progressively from ~262 thousands in February to ~264 in March, ~265 in April, ~267 in May and ~274 in June.

Seeing that markets did not got his message, Powell — who wants all of us to sit tight and to starve until he allows otherwise — started to harshen his rhetoric. His attack on traders nerves worked and markets fall. Accordingly, Orders registered no increase in July first time since February.

Expectations for August are that Orders will decrease (different estimates put it from 0.5 to almost 1 percent of decrease) as a result of the ‘Jackson Hall massacre’ .

After reading this some of you might righteously ask me — why to bother following all that macroeconomic gibberish? After all, market participants — from purchasing managers to floor traders — are guided by mass-media. They all experience the same waves of positive-negative emotions almost simultaneously. Then they act accordingly and uniformly. Is it not better just to focus on prices without going into macro economic speculations?

Purist technical analysts (or ‘chartists’) do just that — they only follow price patterns believing (more or less) in ‘efficient markets’ and that all information is reflected in tickers.

I do not deny the significance of charts for they keep the record of past human behavior, which, as we all know, tends to be highly repetitive. However, as an economist with entrepreneurial experience, I believe that stock and crypto markets are far from being ‘efficient’ and I combine both types of analysis — technical and fundamental — for investment in digital assets purposes.

So, we will continue to review the rest of upcoming updates :)

New houses sales reached a new year low of 511K units in July registering 12.6 percent month-over-month decrease (a record reading since January of 2016). Despite real estate market is slowing down the median sales price of new houses have been risen higher and higher past several quarters. It stands now on ~440 USD (it was USD 406 thousand a year earlier).

Obviously, governments severe over-regulation the RE sectors (and of all others ;) discourage new, more efficient builders to step in and to prevent rising costs of building materials and increased wages from having that effect. Plus, Powell hiking banks rates reflects in mortgage rates, of course.

Analytics expect new houses sales continues to fall in August to 500–490 thousand units (for comparison a year ago it was 686 thousands new units sold during the same month).

After jumping 1% in June personal spending increase slowed 10 fold (to 0.1 percent month-over-month in July of 2022) — the slowest this year. Consumption increased for services (housing and travel) but declined for goods (energy). Not surprising, right ? :)

That is exactly what infuriates Powell — that some peoples still try to maintain their life-style despite him ordering them not to. Many still preserve some of their money, which allow them to summer travel. Obviously, according to FED, that is not what they supposed to do. In his 21 September speech Powell demonstrated his maniacal obsession with the illusionary goal — to chase the inflation jinn back to the bottle. On the way he is eager to ruin the economy and to annihilate regular peoples savings.

Still, in August spendings are expected by analytics to increase (although ever so slightly — for 0.2 percent) on more peoples slowly coming from governments induced self-incarceration mode.

‘Personal income increased $47.0 billion (0.2 percent) in July’ (BEA). Incomes continues to rise since January this year when it went up 2 percent compare to December 2021. It showed consecutive increases to 0.6, 1.2, 0.4, 0.5, 0.6 and 0.1 percent in Feb — July period. It is expected in August to add another 0.1 percent to a previous month and total 0.2.

According to Powell even that minuscule increase is not ‘comme il faut’. Peoples must be subdued for the sake of totalitarian Keynesian theories, Boomers non-informed politics and Powell personal career prospects. So — prepare to face the next ~1 point rate hike on the upcoming FOMC board (11/1–11/2).