These concerns were heightened by yesterday’s data showing consumer confidence fell more than expected in June to a six-month low.
The Conference Board equated the decline with high inflation and worries about a possible recession. Consumers have a fairly bleak near-term outlook for the economy as a whole, with expectations for income growth, the job market and trading conditions falling to their lowest level in nearly a decade.
However, the bulls point to details from the consumer confidence report which also reveal that US consumers are not planning to cut spending as much as some feared, future spending plans for motor vehicles and other big-ticket items. like refrigerators and washing machines actually increasing… So they say. It’s just hard for me to imagine where people are going to find larger lump sums with fuel prices +$5.00 a gallon in many parts and food costs at the grocery store significantly higher than years past.
At some point, you have to believe that the American consumer will reach a limit on their credit cards and will no longer be able to refinance and leverage their home. Remember that over 70% of our economy is based on consumer spending, so if it slows down, the economy slows down.
My question is how much will consumer spending slow down? Right now maybe not that much, but if energy and food prices stay high, which I think they will, and the Fed keeps raising rates, which I think they do, then the American consumer will eventually feel some severe pain.
Wall Street insiders currently estimate Q2 earnings growth at +4.3% for S&P 500 companies, up from nearly +6% at the end of March. Many on Wall Street suspect that those expectations will be even lower as we inch closer to second-quarter earnings season, which “unofficially” kicks off with earnings from Wall Street’s major banks beginning to be released on July 13.
Today, investors will digest another round of comments from Fed Chairman Jerome Powell, who is due to take part in a roundtable at a European Central Bank banking forum. Today’s earnings are due from General Mills, McCormick, Paychex and Stellantis.