GDP shows a slowdown in the consumer. However, consumer spending, like so many things in the macro right now, is nuanced.

While some stores suffer poor earnings like Kohls, TJ Maxx thrives.

While people spend more on what they need than want, many are switching their spending to self-improvement-diet drugs a part of that

While costs in many areas continue to climb (insurance, housing, certain food items)-we are also seeing prices decline in airlines, and car prices)

All of this is in part due to expectations changing that the Fed will stick to higher for longer and that inflation, particularly in the services area, will stay elevated.

BUT

Where is the economy going?

Long bonds are up a bit from the April lows-

Money supply is increasing

The dollar is testing the lower part of the trading range

Geopolitics continue to impact

1. Freight costs
2. Supply chain
3. Government spending and rising debt
4. De-Globalization
5. US reshoring

And then there is Mother Nature- with floods or extreme droughts impacting crops- coffee, orange juice, cocoa- to name a few, now we watch for a predicted rough hurricane season and the impact on infrastructure.

This all points to a more stagflationary environment.

And does not rule out recession down the road- especially if the FED is considering a “twist” where they buy long bonds, and sell near-term bonds, but without raising the rates, in essence trying to flatten the yield curve. Or worse, they lower rates sending the signal they are worried about the economy.

Since August 2023, the U.S. has lost over 1.3 million full-time jobs, while gaining 1.4 million part-time jobs over the same period. The year-over-year measure of full-time jobs has fallen into recession territory.

Banks are worried- United Wholesale Mortgage came out with- homebuyers who qualify won’t need to put down an upfront down payment.

The first mortgage will pay 97% of the cost- the second mortgage will pay the remaining 3% with no accruing interest and will balloon- and be paid off when the mortgage is refinanced or paid back.

But this assumes no drop in housing prices or reduction of interest rates- in that case, homeowners cannot refi to lower rates if they get enough equity out of their house to pay back the 2^nd mortgage.

Bottom line- the best barometers of the next direction

1. Junk bonds versus long bonds
2. Silver to gold ratio
3. Oil prices
4. Transportation sector-which broadcasted this last dip from the highs
5. Tech and Utes leading take a backseat to small caps picking up.
6. Dollar breaks down under 104

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