Stocks Outlook - Monday, Dec. 3

Thoughts

  1. Inflation-adjusted personal consumption expenditures are trending sideways. Suggests that the current decline is not the start of a bear market.
  2. Capacity utilization is trending upwards. Suggests that the bull market isn’t over
  3. Consumer Confidence is extremely high. A sign of late-cycle behavior.
  4. Unit profits are down: this equities bull market doesn’t have a lot of years left.

1 am: Inflation-adjusted personal consumption expenditures are trending sideways. Suggests that the current decline is not the start of a bear market.

The year-over-year change in Inflation-adjusted personal consumption expenditures is trending sideways.

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Historically, this data series trended downwards in the beginning of a bear market & economic recession. This suggests that the stock market’s recent decline is a correction and not the start of a bear market.

1 am: Capacity utilization is trending upwards. Suggests that the bull market isn’t over

Capacity utilization continues to trend higher.

(Click on image to enlarge)

In the past, Capacity Utilization trended sideways or downwards before bear markets and recessions began. This is because as the economy becomes “as good as it gets”, industry has excess supply and rising inventories, so it no longer needs to expand capacity utilization.

1 am: Consumer Confidence is extremely high right now. A sign of late-cycle behavior.

Consumer Confidence remains very high right now.

(Click on image to enlarge)

You can see that Consumer Confidence was this high from 1967 – 1968 and 1997 – 2000. While this isn’t a timing indicator (it doesn’t tell you when the bull market will top), it does tell you that the bull market doesn’t have many years left. This is a late-cycle sign.

1 am: Unit profits are down: this equities bull market doesn’t have a lot of years left.

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