All Eyes On The Debt Ceiling

We also get data on Q1 GDP this week as we near a potential recession

Author

Mark Roussin
May 22, 2023

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Market Talk ⏪

Here is a look at 5 topics from the week prior and/or related to the week ahead for investors to be mindful of:

  1. Debt Ceiling Deadline. This continues to be an area of focus, as leading up to last week, both sounds sounded optimistic about a deal being made, but as the week went on, it seemed as if both sides of the aisle were growing further apart. If deal talks linger, this could weigh on stocks in the days and weeks ahead. A resolution though could add fuel to the slow grind higher we have seen of late.

  2. Economic Confidence Falling. The US economy continues to crawl towards what seems like the most foreseen Recession in modern history. Last week, the Leading Economic Index (LEI), which tends to provide early indications of significant turning points in business cycles and foreshadows more near term expectations. In April, the LEI declined for the 13th consecutive month, signaling a worsening economic outlook. The LEI is at levels only seen in the last five recessions, which likely confirms we are headed towards the expected recession.

  3. Consumer Debt climbs to new RECORD high. I have documented frequently over the past few months my concerns around the weakening US consumer. Last week, we got report that consumer debt climbed to a new record high surpassing $17 trillion. A lot of debt usually coincides with home mortgages, but in Q1, new mortgage debt totaled only $323.5 billion, which was the lowest amount since Q2 2014. Delinquency rates for all debt increased 0.6% for credit cards to 6.5% and auto loans climbed to 6.9%. Student loan debt now sits at $1.6 trillion.

  4. Labor Remains Tight. Last week, the number of Americans filing for unemployment dropped 22,000, to 242,000 total, which was a bigger drop that expected. Some of this has to do with some fraudulent activity that was found in Massachusetts, which contributed to the increase we saw in unemployment filings last week. The tight labor market continues to suggest a soft landing for the Federal Reserve is possible, but it has also made the fight against inflation difficult.

  5. China’s reopening plans going slower than expected. China released their April data in relation to economic activity, which showed China’s industrial production jump 5.6% in April, when economists were looking for 10.9%. Retail sales in April climbed 18.4% year over year, but that also lagged economists expectations of an increase of 21%. The reopening is certainly happening, but the pace is much slower than expected.

Deep Dive 📰

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This week, PREMIUM subscribers we be receiving our first Stock Deep dive for the month of May.

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US Markets 🇺🇸

Here is a performance summary for US Equities:

Here is a look at US Treasuries:

The Fear & Greed Index measures market sentiment based on the following seven factors: put/call ratios, junk bond demand, stock price breadth, market volatility, stock price strength, safe-haven demand, and market momentum.

The Fear and Greed Index moved further towards Extreme Greed as the markets climbed higher over the past week. Currently, the index has a reading of 67, which is up from the prior week reading of 60.

Earnings on Deck 💰

This week we get another round of retail earnings following last week. Here is a look at who's reporting this week:

Dividend News 📝

Here are some notable analyst upgrade/downgrades from the previous week:

  • Raymond James upgrades Charles Schwab to outperform from market perform

  • Deutsche Bank upgrades DuPont to buy from hold

  • BMO upgrades Gilead to outperform from market perform

  • Truist downgrades Procter & Gamble to hold from buy

  • Deutsche Bank names Charles Schwab a top pick

  • Bank of America upgrades Cincinnati Financial to buy from neutral

This Week 📆

Monday

  • Fed’s Bullard speaks on U.S. economy and monetary policy

  • Fed’s Bostic and Barkin discuss technology-enabled disruption 

Tuesday

  • Dallas Fed’s Logan gives welcoming remarks at a conference on technology-enabled disruption

  • PMI Composite (May)

  • New home sales (April)

Wednesday

  • FOMC Minutes

Thursday

  • GDP (Q1)

  • Initial jobless claims (week ended May 20)

  • Pending home sales (April)

Friday

  • None

Other Resources 📺

If you have not done so yet, check out my growing YouTube community where I publish weekly videos focused on building wealth through investing.

Here is a look at my latest video: 2 REITs Similar To Realty Income but CHEAPER:

Another video I put out last week: 3 High-Yield Dividend Stocks That Look Cheap:

Here are a few others of my latest videos:

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Have questions? You can email me directly at [email protected].

Happy Investing!

Mark

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