When Covid hit, first impulse was to spend cash on home. When all opened up, first impulse was to spend on experiential. Good question (for quite some time) - what's next? Looks like (Walmart, Q2) it could be simple life or picky cash spending avoiding big outlays (which was overdone in 2020-2021) and cutting on experiential (2023). Sounds very organic, given all the recessionary (almost 2 years) background. Most of people simply balance the cashflow while Covid induced printed money cash surplus ended. People with cash may simply need a break from everything until life will continue as before the Covid.
Low expectations about the future (contrasting normal current confidence - h/t end of July, Authers) is probably an ongoing hangover from GFC, which was catalyzed/reminded by Covid and, especially, the uncertainty induced by AI, and polarization of US because of growing inequality. It is clear that internet was an obvious tailwind (1995) for all but AI put in jeopardy many higher earning professionals. [I added this after rereading the post: this sounds very bullish because people are not yet complacent, they still remember.]
On sustainability of margins: China Shock, once it started happening, lifted both the profit share of GDP and the Gini coefficient of inequality to the highest levels since the Second World War. Obvious, that current state of event are towards more inflation and smaller margins.
To grease the wheels (and feed the Skinner's pigeons), its probably 1-2 25bps cuts this year and same next year, at best. Hopefully (cheering for muddle through).
Stanley Druckenmiller used to say - cyclical stocks are the best economists he knows. Back in December 2018, he cited the sharp selloff in cyclical stocks such as autos, home builders, banks and retailers as a warning sign that the Fed has tightened interest rate too much. Shortly after, the Fed pivoted, ending the tightening cycle. Now, there are plenty of pockets with their own (relatively) good (home builders, banks) and bad (discretionary retailers) lives. Do nothing is the path of least resistance.
Thought about going long yen a year ago. Thought about it a few month ago. In hindsight, everything is obvious - once it reached 160, it took it a month or so until "blew up".
At this time it seems that majority of experts and forecast agree again, like in December.
Oil is the Jocker at the moment.
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