Stock Markets Analysis – Is Recession Possible?

Those concerns were compounded by data yesterday showing Consumer Confidence dropped more than expected in June to a six-month low.

Consumer confidence

The Conference Board equated the drop to high inflation and concerns about a possible recession. Consumers have a pretty grim short-term outlook for the economy overall, with expectations for income growth, the job market, and business conditions falling to the lowest level in almost a decade.

However, bulls point to details in the Consumer Confidence report that also reveal US consumers do not plan to cut back on spending as much as some have feared with 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 folks are going to come up with the larger lump sums of money with fuel prices +$5.00 per gallon in many parts and food costs at the grocery store significantly higher than in years past.

At some point you have to believe the US consumer will reach a limit on their credit cards and will no longer be able to refinance and leverage their homes. Remember, over +70% of our economy is based on consumer spending, so if it slows so slows the economy.

My question is how much will consumer spending slow? At the moment perhaps not that much, but if energy and food prices stay hot, which I’m thinking they will, and the Fed continues to raise rates, which I’m thinking they are, then eventually the US consumer is going to feel some serious pain.

Q2 earnings

Wall Street insiders are currently estimating Q2 earnings growth of +4.3% for S&P 500 companies, down from almost +6% at the end of March. Many on Wall Street suspect those expectations will be moved even lower as we get closer to Q2 earnings season, which “unofficially” kicks off with results from big Wall Street Banks that start rolling out on July 13.

Today, investors will be digesting another round of comments from Fed Chair Jerome Powell, who is scheduled to participate in a panel discussion at a European Central Bank’s bank forum. Earnings today are due from General Mills, McCormick, Paychex, and Stellantis.