FEBRUARY 12, 2024 – The January report came in at 3.1%, just below my forecast of 3.2%-3.3%. and above the consensus estimate of 2.9%.
The 3-month annualized inflation rate is 1.0%. The 6-month annualized inflation rate is 1.8%. These figures are lower than the annualized rate (3.1%) and thus indicate the annual CPI should drift lower.
The data is predicting a reading between 2.6% and 2.7% next month. Like last month, I think this will be way off. Inflation is historically high in January and February. I am going to forecast 3.0%-3.1% for next month’s figure.
ECONOMY – We have had 6 straight quarters of above 2% GDP growth since the recession in the first half of 2022 ended. The last two quarters have been above 3% (!) and some forecasts expect another 3%+ figure for the First Quarter of 2024. With annual population growth around 0.7%, any GDP growth above that amount is exceptional. The chance of a recession occurring this year remains slim to nil. It certainly won’t occur in the first half of this year.
STOCKS – The Dow 30 continues its march towards 40,000. I never did see anyone else predict 40,000 this year. I suspect there are a few others like me out there somewhere. As they saay, never count your chickens before they hatch. 38k+ is not 40k. But, the stock market is saying the economy this Summer should be extremely strong.
The recession mongers couldn’t have been more wrong for the past 20 months. They will continue to be wrong into the foreseeable future.
Shalom,
The Mann
Tag Archives: GDP
THE REMAINDER OF 2023 – ECONOMY
UPDATE JULY 27, 2023 – 2nd Quarter came in at a whopping +2.4%. Far exceeding expectations that were below +1.5%. So, we have an economy that has expanded, not contracted, this year! The stock market told us this would happen. For anyone you know that has been predicting a recession in 2023, please ask them if they admit they have been totally wrong. People need to admit their errors and stop being broken clocks. If they don’t, they have no credibility. As I note in my original post below, it is likely the current forecast of +0.5% and 0.0% for the remaining two quarters will change to the upside as the year carries on. Will the economy slowdown from +2.0%-2.4%? Yes. The stock market has said it will be stagnant the remainder of the year. But, will we see two negative figures in a row? The odds are near zero. Plan accordingly.
JULY 22, 2023 – It is all but guaranteed that the recession mongers will be wrong about such occurring in 2023. As I forecast earlier in the year, by Summer (i.e. now) those people would begin to move their prediction to a recession occurring in 2024. Enough time wasted on the large group of media and economists that are broken records.
So, what does the future hold. The past 12 months have been very easy to predict for the economy, housing, and inflation. IF you just read what the stock market (i.e. Dow 30) is telling us. Yes, it is that simple. And, yet, 99%+ of the public and pundits don’t do it.
The Dow 30 peaked in December 2022 after bottoming in October 2022. That told us to expect weakness thru April 2023. Sure enough, the Silicon Valley Bank collapse and the associated bank panic occurred in March and April.
Since December 2022, the stock market trended sideways for 8 months. Just this past week the Dow finally broke thru the 35,000 level after about 7(!) failed attempts. So, what does this tell us? It tells us that the economy is expected to be stagnant for the last 6 months of this year. And, based on this upside breakout, the economy should see an uptick in the 1st Quarter of 2024. This is a very early interpretation as the breakout just occurred this week and is only a small amount above the December 2022 high.
Is the stock market, and thus smart money, correct? Yes. As usual. 1st Quarter GDP was +2.0% (revised from the initial report of 1.3%). 2nd Quarter GDP is project to be +1.3%-1.4%. But, 3rd and 4th Quarter GDP are expected to be barely in positive territory. Exactly what the stock market has told us would be the case for the past 8 months – a stagnant Dow 30 forecasts a stagnant economy 6 months out.
Forecasts obviously vary. I have seen most to be around +0.5% for the 3rd Quarter and 0% for the 4th Quarter. But, I think those forecasts are trending up due to the strengthening housing market (that will be my next post, so please come back:) ).
The recession mongers will be screaming they told us the economy was caving. One, they have been calling for a recession for over a year (right after the actual recession just ended!) and GDP has come nowhere two negative quarterly figures in a row. Two, the stock market has forecast the ups and downs with 100% accuracy. It hasn’t been a broken record.
Based on my forecast that the CPI will trend up the remainder of the year, I suspect the market will tell the Fed to raise the Fed Funds Rate several more times. Note, the public is wrong to blame Powell for raising rates. He is simply doing what the Fed has done forever – following exactly what the market has told it to do. So, the market has obviously priced in all Fed actions ahead of the Fed meetings because the market told them what to do at the meetings!!!
But, I digress…..my point is the recession mongers will remain a broken record as they will continue to say that the Fed’s raising of interest rates is going to push us into a recession. As of today, the stock market says they are wrong and a recession is not going to happen. I put my money on the stock market instead of all of those economists that have been 100% wrong for the past year (and longer).
I believe my forecast of the housing market will be my next post. I will probably combine it with a brief discussion on banks.
Shalom,
The Mann
HAPPY 247th TO OUR REPUBLIC
JULY 4 – Hopefully, everyone had a fun and safe 4th of July. As we are half-way through this year, just a few items to mention.
I am seeing the first articles questioning all of those people that have been forecasting a recession. The tide is about to turn on all those who will have to admit they are wrong. People are finally starting to say hey we had the Recession last year. Thanks for joining the small club of us that have been saying this for a year now!
First Quarter GDP was revised upward from 1.3% to 2.0%. Second Quarter GDP forecasts are around 1% (Federal Reserve is projecting 1.3%). That would be an annual rate of 1.5%, which is in line with population growth. I am probably wrong about this, but I have always thought GDP growth should be about the same as population growth. If we look at a chart of the growth rates for both, we will see they have been declining in unison for 30+ years. I seriously doubt the last two quarters of this year will have negative GDP.
Lastly, Truflation analyzes 10 million data points (so they say) daily in comparison to the 80,000 data points (again, so they say) analyzed monthly for CPI. Thus, a quicker and more encompassing inflation rate is provided. Truflation is down to about 2% versus 4% for CPI, which will be about 3% in a few weeks when the next report comes out. Again, all of those people that a year ago were forecasting 10%+ inflation this year need to stand up and admit they were wrong.
Oh, the housing stock index I mention from time to time hit 80 this week. Up from a low of 53 last October. That is a nice 50% move the masses missed because the media was talking about the upcoming housing crash. Houses in my market are back to selling above list price and instantaneously, again. As I have posted, 7%+ mortgage rates are not an issue for people buying houses.
For a summary of recent economic data, this is worth checking out:
Strong economic data turns recession fears into recession doubts (yahoo.com)
Happy Birthday America!
Shalom,
The Mann
INFLATION FORECAST, BANKS & HOUSING
UPDATE – JUNE 20, 2023 – I saw a few items of data today in regard to housing. Here they are. No need to add any commentary.
Construction on new American homes surged 21.7% in May, as homebuilders ramp up building single-family homes to meet strong demand from buyers. Housing starts rose to a 1.63 million annual pace last month from 1.34 million in April.
Builder confidence in the market for newly built single-family homes in June rose five points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the sixth straight month that builder confidence has increased and is the first time that sentiment levels have surpassed the midpoint of 50 since July 2022.
I saw a chart of this index going back to 1985. Every time the index crossed back above 50 it went up to about the 70 level before putting in a major top. The thing is it took about 1-5 years to get to that new top. Slow, but steady it goes. If it follows history, that means we are in for an extended period of positive sentiment by home builders for at least the next few years. As a side note, there is at least a 50/50 chance of the index dipping back below 50 before resuming its upward trend. This would be a great head fake to keep the recession screamers pessimistic.
JUNE 14, 2023 – As forecast, inflation dropped about a full percentage point and will do so again next month.
The 3-month annualized inflation rate is 4.4%. The 6-month annualized inflation rate is also 4.4%. These figures are above the annualized rate (4.0%) and thus indicate the decline in the annual CPI is likely to reverse after next month’s figure is reported.
Based on the data, my prediction for next month’s figure is 3.0%-3.1%. I like the data and am confident the next reading will be in that range.
This will finally be the July 12th figure I forecast over 6 months ago. My original expectation of a sub 2% reading will be wrong. Albeit, 3% is alot closer than those that were predicting 10%+ this year.
As I mentioned last month, it looks like inflation will rebound in the second half of the year to 4%+. There are a few indicators that are pointing towards significant deflation (e.g. diesel prices down 30% yoy). If this occurs, there is a chance inflation can stay around 3%.
BANKS – Regarding banks, week after week goes by without any closures. At this point, we are much closer to my forecast of 0-10 closures than the 176-200 closures forecast by many people. I am lucky to have some incredible bank and credit union clients. Talking with them there has been almost no CRE loans going under. Even in good times, loans fail. So far, nothing significant has occurred. Yet, the world is predicting CRE loan defaults will be the next major shoe to drop. I just don’t see it. I will make a post with some numbers explaining why I don’t see the refi issue resulting in loan defaults.
The Regional Bank Index (KRE) has exploded and is about 7% above the low set the Monday after the SVB/SBNY closings. It is a full 27% (!) above its most recent low. And, you probably saw the headline that the stock market entered Bull Market territory (i.e. up 20%+ from its low) last week. I have been saying this was the case since just after the October lows.
HOUSING – The American Enterprise Institute’s (AEI) Home Price Appreciation (HPA) Index was up 0.7% month-over-month in April. It has been up every month this year. The Homebuilders Stock Index is up an incredible 50% (!)from last year’s lows. Those who forecast a crash in the housing market appear to be way off. As I forecast about a year ago, the housing market would slow way down and possibly go slightly negative (that has occurred in the hottest markets). A year later I am seeing a slightly improving market ahead.
SUMMARY – Sadly, if you have been waiting for the Recession of 2023 to occur (which as I have noted for 9+ months now, it was the Recession of 2022), you have already missed out on the stock market being up 20%, homebuilder stocks up 50%, and those dreaded bank stocks being up say 5%-25% from possible buying points. Even if a recession occurs later in the year (I still do not see two consecutive quarters of GDP being likely), the opportunity to make a large profit on your investments has already occurred. Plus, the stock market predicts the future 6 months out, and it is saying zero chance of a recession.
It seems like a longshot, but the wave theory I follow seems to indicate the possibility of a huge stock market rally directly in front of us. That is my interpretation. Regretfully, my idol who brought this theory to the forefront 44 years ago sees a huge leg down ahead. I hate disagreeing with him. We shall see how it turns out. The stock market has been in a boring trading range for several months now. It seems to be wrestling with the indicators that point up and those that point down at the same time. The future is never easy to predict:) Not even for the smart money.
Til next month.
Shalom,
The Mann
GDP & BANKS UPDATE
APRIL 29, 2023 – 1st Quarter came in at +1.1%. It continues to slow. But, another positive quarter. Early forecasts show 2nd Quarter GDP being slightly positive. However, with ample time for adjustments, there is a chance it could end up being negative.
Quick note, I received an email from the Fed last week showing it was expecting 1st Quarter GDP to be +1.13%. They appear to be the only one to get the forecast right. Of course, they have access to all of the data that goes into the GDP.
Regardless, it will be around Halloween before a recession can be in the books. And if the 2nd Quarter GDP does end up being positive, a recession cannot be official until late January 2024.
So far, the stock market says a recession will not occur this year. We shall see who is right – the stock market and the smart money or everyone else that is all but guaranteeing a recession will occur in 2023.
Will the Leading Economic Indicator that has declined for 10+ months and has been signaling a recession for many months be right?
Will the fact that bank credit tightening leads to a recession be right?
There are numerous other indicators signaling a recession will occur this year. The only problem they have is they are not the stock market.
My bet is, and always has been, on the stock market being correct. As always, we shall see.
BANKS – Still no new bank failures. First Republic Bank was part of this original crisis that occurred with the SVB and SNBY and Credit Suisse failures. The only other bank that is walking on thin ice is Deutsche Bank. Beyond this initial list, no banks have failed. The count remains 0 versus the 176-200 predicted by many people. (UPDATE – In 1907, JP Morgan the person came to the rescue of the banking system and in 2023 the company with his name did the same.))
The Regional Bank Index remains about 2% above the low set during the SVB/SBNY crisis with the drawdown to date being 3%. Money is not being made on these stocks. But, they sure have not fallen apart. Friday was a classic day that fools the public. The headline news was First Republic Bank heading towards failure. Instead of being down, both the Regional Bank Index and the Dow were up. The Dow is now above 34,000 again. Remember, a Bull Market climbs a wall of worry. The more negative news we have this year, the higher stocks should go. And it looks like all we will hear from the pundits is negative news. When the news turns positive, the stock market will have already topped.
Happy trading and investing.
Shalom,
The Mann
DATA TREND
JANUARY 26, 2023 – Say you saw the following list of data points: +2.3, +6.9, -1.6, -0.6, +3.2, +2.8, +0.4, +0.3, +0.2, +0.1. To be upfront, the first 6 numbers are actual and the last 4 are future estimates.
Assuming positive is good and negative is bad, when would you say the bad event occurred? Did it occur just once? Or do you see data showing multiple bad events?
To me, the bad event occurred when the data was -1.6 and -0.6. It does not occur anywhere else. Albeit, the last four numbers aren’t anything to cheer about on the good side.
I keep saying – the Recession occurred in the first half of 2022 – and asking – why is everyone saying 2023 will see a Recession?
As for the last four numbers, I have seen estimates of GDP growth around 1.0% for 2023 with the latter half of the year being the weakest. Again, it is likely there will not be two consecutive quarters of negative GDP (the definition of a Recession….like it or not….I have never been a fan….what if we had -0.5, +0.1, -0.7? technically not a Recession…but, to me, that looks like a Recession…anyway, we have had this definition for decades).
If I could define Recession using GDP only it would be 2 or 3 consecutive quarters where the sum is negative. But, no one asked me:)
Lastly, the favorite service I subscribe to is forecasting a -1.6% GDP in the 1st Quarter of 2023. That would be a significant decline. The argument is over half of the 4th Quarter’s 2.8% increase was due to increasing inventories and that will be fully reversed in the 1st Quarter.
I haven’t even tried to figure out how to forecast GDP. Forecasting CPI was a big enough challenge. For now, I will leave GDP forecasting to others.
Shalom,
The Mann
THE MARKET ENTERS THE PREDICTED RANGE
UPDATE MARCH 27 (EVENING) – The DOW peaked at 22,595 on Thursday. That is within 100 points of my target. I’ll be surprised if my third forecast target in a row is this accurate. But, if so, I’ll take it.
I will revisit price targets for the upcoming low next week.
The way the waves are looking the following should occur: The US Dollar will rally to new highs short-term, Gold will fall below $1050-$1250 longer term, Silver will decline below $8 longer term. and stocks will fall 30% from current levels short-term. How all of that happens I have no idea. But, that is what I see happening. I never ask why or how.
The $2+ Trillion stimulus bill was signed today. And the DOW was down 915 points. The markets already have priced in all of the stimulus that will be thrown at the country ($6+ Trillion). They are looking at where we will be this Summer or Fall and they aren’t happy with what they see. I am guessing they are pricing in the virus coming back in the Fall and Winter.
Regarding Oil, I did get a reply from the experts at Elliott Wave International. My thoughts that the combination 120-year bull and bear market might well be coming to an end are on target. Obviously, it is rare to have such an opportunity occur in a our lifetime. There is an issue regarding the length of this bear market (timewise). I need to analyze the 120-year move in a bit more detail to see what I can figure out. I will keep you posted.
I have a gripe about healthcare providers complaining about going to work….about being on the front lines and subject to getting the virus. Seriously? Did you think you would take care of sick people and not encounter a contagion? Geez, too much complaining about having to work nowadays. Just do the job you chose as a career. Be proud that you are helping people. You have a chance to help others and change the course of history. Stop complaining.
Oh, I do hope GM cans their CEO. Trying to make a killing off of this crisis is obscene. Like him or not, Trump is great at not letting anyone screw over our country. I am glad he invoked the Protection act and I do hope GM doesn’t get a dime for the respirators they will make. To think we bailed them out last time around….and this is the thanks we get. I will never buy a GM product.
Til Monday evening…stay safe.
The Mann
UPDATE MARCH 25 (EVENING) – The DOW rallied to 22,020 today. It has satisfied getting to the range of a top for this counter trend rally. It then fell almost a 1,000 points in the final 5 minutes due to Bernie Sanders threatening to hold up the bailout legislation. It cannot be ruled out that the DOW could rally back above 22,020. But, once a target range is satisfied, I start concentrating on the next wave – which is down to 13,900 to 15,400.
For trivia, this was the best 2-day rally since the 1987 crash. And I think it was the first consecutive up days in a month.
Gold backed off its rally quickly. Oil is starting to get its legs back.
Hopefully, Friday evening the waves will be telling us more.
Regarding real estate, early info is saying that buyers are asking for a 5%+ reduction in price on existing contracts. That isn’t all buyers. And that isn’t much at all. Starter homes continue to sell well. National Tenant Lease properties are in demand as a flight to safety. Since these are really corporate bonds, and not real estate, this makes a bit of sense. Of course, the question is do these buyers know what kind of downgrade the corporate bond rating will get for the tenant in the property they are looking at? Or are these unsophisticated buyers just looking for anywhere to put their money?
Please share anything you are hearing regarding real estate prices, cap rates, closings falling thru, et al. Til Friday evening…
The Mann
UPDATE MARCH 24 (EVENING) – I was going to post this regardless of today’s outcome. But, worth noting today was the largest up day since the depths of 1933.
Most, if not all, analysts never state what could occur that would show their forecast to be wrong. Flat out, if the DOW rallies above 24,200 my interpretation of the wave theory will be wrong. Technically, it would just mean the waves were showing something else was happening. But, to me, I say I am wrong.
I did some analyzing today and thought this rally would terminate around 22,500. Bob Prechter’s firm put out their analysis this evening and said about 21,200-22,100 should be the top of the range. The main point is this rally absolutely cannot go above the late February low around 24,200.
Some additional analysis suggests that 15,300-15,400 is really looking good for the final bottom (i.e. for this first ‘A’ wave of a Bear Market….wherever this low occurs, it should be broken down the road after a significant rally occurs). But, a lower target of 13,900 showed up so I would have to update the ‘final’ bottom range to be 13,900-15,400.
So far, the 27,100 top forecast for Wave 2 of the decline was almost exactly on target. And the 18,200-18,400 range for a possible appears to be for Wave 3 of this decline. Both have been right on the money. I suppose my luck will run out soon:) Albeit, I usually do excellent in a major downturn, so we shall see.
22,500 for the top of Wave 4 and 13,900-15,400 for the bottom of Wave 5 of ‘a’ are up next.
I need to confirm with Mr. Prechter something I am observing regarding the Oil market. It is significant, so I hope to get his thoughts on the matter. Sam Zell said he bought some energy stocks. If what I see occurring in the Oil market, per the wave theory, is accurate, then we might have an opportunity like that of the stock market in April 1933. Will keep you posted on this one.
Oh, the $200 Gold rally in two days is due to people suddenly realizing they can’t buy the physical product anywhere. I use KITCO and they are all but sold out. However, the wave theory allows for this rally to still be part of the larger decline below $1056. No change of thought on that forecast because of these two days.
Stay at home. Be safe. Enjoy time with your family.
The Mann
MARCH 23 (EVENING) – A fairly calm day in comparison to the past few weeks. The Dow bottomed below 18,300 today. It thus, entered the 14,600-18,400 range I forecast when it was around 25,000.
My analysis of the waves is very much in sync with others. I would say there is a 25% chance of a significant bottom occurring between the 17,000’s and today’s low and a 75% chance of a bottom occurring in the 15,400 range. This latter figure has significant support as bottoms in 2015 and 2016 occurred around this figure. With both the waves and chart support suggesting 15,400 as the low, this figures gets greater weight at this time.
It is amazing to hear predictions of -30% to -50% for GDP and up to 30% unemployment. If these figures occur, we will have blown away The Great Depression and The War of Northern Aggression (aka the Civil War for those north of the Mason Dixon line).
TRIN is at 0.82 is incredibly far from signalling a bottom (1.60+).
VOO is at about -$2.5 Billion for last week. I would need to see -$10 to -$20 Billion to know the public has thrown in the towel. Or maybe several weeks of -$10 Billion at a minimum.
For those interested in Corporate Bonds, I was introduced to an indicator to watch. First, about 40% of Corporate Bonds graded BBB (lowest investment grade before becoming junk bonds) are expected to be downgraded to junk. Keep that in mind regarding current ratings. Remember, rating agencies are almost always BEHIND the curve with their grades. They will finally lower their ratings once all of the decline has occurred. They get paid for such hindsight.
Back to bonds….as long as the ETFs are trading at a discount to their NAV (Net Asset Value), the market is saying prices aren’t low enough, yet. I will follow ticker symbol BND (Vanguard Total Bond Market Index Fund). It is currently trading at about a 3% discount.
Regarding Corporate Bonds, does anyone have a source that shows what is out there and what their prices are? Barron’s and the WSJ used to list all of them in their papers. But, they don’t do that any more:( If you know of a site that has this info, please share it with me. Thanks.
We shall see what the next two days bring and I will be back Wednesday evening with an update.
Stay safe.
The Mann