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- Inflation, specifically core inflation (ex-food & energy) is running at 5.3%, comfortably below the October 2022 high of 6.6%. Comfortable is not enough for Fed Chairman Powell, who testified in Washington this week and doubled down on the Fed’s goal to raise interest rates at least twice, before the end of the year, to reach the goal of bringing inflation down below 2%. While a number of pundits are predicting success, even going so far as to suggest reaching a level of deflation.
- Economic Data, after a brief rise in May 2023, the U.S. ISM Manufacturing Purchasing Managers Index (PMI) above 50 (suggesting economic expansion) has remained below 50 (suggesting contraction) for the rest of the previous 8 months including June 2023. While the U.S. ISM Non-Manufacturing Purchasing Managers Index (PMI) has hovered just above 50, likely due to a stronger work force, that level has been mostly flat for the last three months. Worth noting is a less advertised piece of data referred to as the Leading Indicator, declined in May 2023. Historically, when this indicator has declined 3 months in a row, it suggests a coming economic slowdown. Curiously, as with much these days, the index has declined every month since June 2021.
- Earnings will emerge as newsworthy when the 2nd Quarter 2023 ends on June 30th. Last quarter most analyst forecasts were off, due to expectations being lowered following negative guidance from CEO’s last quarter. This year the markets have moved aggressively higher and forecasts have been conveniently increased. In my opinion, this could be a set up for another disappointment, therefore worth paying attention to the CEO guidance, rather than the results.