Recent economic data shows its the US consumer vs the Fed

Recent economic data shows it’s the US consumer vs the Fed

The University of Michigan conducts a poll twice a month on consumer sentiment, which includes both a current sentiment and an expectations sentiment. The Preliminary numbers are released in the middle of the month and the final results are released at the end of the month. Aside from providing insight as to how consumers are feeling about the economy, it also provides inflation expectations for 1 year and 5 years. The consumer sentiment numbers missed expectations; however, they were still the highest they have been since the pandemic began. What is of more interest, though, is the Inflation expectations data. The 1-year inflation expectation was 3.7% vs 3.2% expected and 2.7% for March. This is the highest reading since 2012!

Source: University of Michigan

What are economic indicators?

As evidenced, the stock market is forward looking, meaning they price in future earnings of companies. Today, the S&P 500, the Nasdaq 100, and the Dow Jones have all made all-time new highs. The VIX, which measures volatility of the S&P 500, is trading at pre-pandemic levels, and below the “line in the sand” 20.00 level, near 16.42.

Source: Tradingview, CBOE, City Index

When one looks at recent activity in meme stocks such as GME and AME, the recent fund blowup by Archegos (which not only blew up the fund but cost $10 billion in losses to banks), and recent activity in volatile instruments that are traded on exchanges such as Coinbase, its easy to tell the markets are awash with cash. Why isn’t the Fed pumping the brakes?

Fed Chairman Powell was upbeat at his interview on “60 Minutes” earlier in the week, yet he still uses words such as transitory and unsustainable to describe inflation expectations and bond yields. But the consumer isn’t believing him. With stimulus checks in hand, retail sales skyrocketing, and non-farm payrolls approaching 1 million for the month of March, why wouldn’t consumers expect inflation to be much higher in 1 year? That is the multitrillion dollar question!

Everything you need to know about the Federal Reserve

There are 2 sayings that are battling it out at the moment. One is “Don’t fight the Fed” and the other is “Never underestimate the US consumer”. Something has to give. Either the consumer has to cut back expectations of higher inflation or the Fed has to begin to offer signs of tapering monetary policy. The winner of this battle is the one that will determine the next direction for monetary policy!

Learn more about forex trading opportunities.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.