Consumer Confidence Drops as Delinquencies Continue to Rise

Warren Buffett expressed caution around overpaying in his most recent letter. Jamie Dimon – JP Morgan CEO – said today there’s a 50% chance of recession – with a soft landing slim. News of falling consumer confidence and rising credit delinquencies also hit the tape today. This begs a question: is the consumer in 2024 stronger than what we saw in 2023? My guess is no.

Is it Still Going to be a “Soft Landing”?

2023 has been one of the more difficult years to navigate. For example, if you chose the wrong stocks, sectors or simply decided to hide in cash – you didn’t fare well. However, what’s also made it hard has been the various shifts in sentiment the past ~9 months. These shifts have ‘whipped’ traders around. Today, with the US 10-year yield challenging almost 5.0% – the “R” word is back in the vernacular. Much of this can be explained by understanding where we are in the economic cycle… and today it’s “late cycle”. The challenge is navigating this phase is the most difficult of any… as it will often last longer than many expect.

One Trend That Isn’t Sustainable

More “bad news is good news” hit the tape today… The monthly ADP private jobs number came in far weaker than expected. I say ‘good news’ as it potentially means less Fed (or at least that’s the assumption). Here’s CNBC: “Job creation in the United States slowed more than expected in August, according to ADP, a sign that the surprisingly resilient U.S. economy might be starting to ease under pressure from higher interest rates”

Will a US Debt Downgrade be a ‘Bearish’ Catalyst?

Earlier this week, Fitch Ratings downgraded the U.S.’ credit rating. Stocks slipped a little on the news and bond yields ticked higher. The US 10-year treasury yield is now north of 4.10%. Fitch cited “expected fiscal deterioration over the next three years” and an erosion of governance. Hard to argue. Fiscal restraint is not one of the government’s strengths. But this isn’t entirely new news. For example, the credit agency placed the nation’s rating on watch in May following a near-default after members of Congress butted heads over raising the debt ceiling. However, this put the wheels in motion….

For a full list of posts from 2017…