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January 14 - On January 14 local time, the U.S. Supreme Court did not rule on the legality of the Trump administrations tariff policies, and the relevant cases are still pending.The U.S. Supreme Court did not rule on the legality of Trumps tariffs.January 14th - New regulatory requirements have been introduced for fund dividends. In a recently released "Institutional Supervision Report" (hereinafter referred to as the "Report"), regulators reported on several non-compliant dividend distribution practices, signaling a "zero-tolerance" policy towards illegal dividend distribution in the fund industry. The Report outlines three regulatory requirements for fund dividends: first, strengthen full-process management to ensure the legality and compliance of fund dividend distribution; second, strictly control the amount of dividends to curb artificially inflated net asset value before distribution; and third, strictly control dividend information and prohibit any form of information disclosure.January 14th - According to a report from the National Association of Realtors (NAR), existing home sales in the U.S. rose 5.1% month-over-month in December. On a monthly basis, home sales increased in all regions. On a year-over-year basis, sales increased in the South, remained flat in the Midwest and West, and declined in the Northeast. NAR Chief Economist Lawrence Yun stated, "2025 will remain a challenging year for homebuyers, with record high home prices and historically low existing home sales. However, market conditions began to improve in the fourth quarter, with mortgage rates declining and home price growth slowing. After seasonal adjustment, December home sales reached their highest level in nearly three years, with widespread increases across all four major regions." The economist added, "Inventory levels remain tight. Homeowners are more cautious in deciding whether to list or withdraw their properties due to low seller willingness to sell. Similar to previous years, more homes are expected to enter the market starting in February."On January 14th, Federal Reserve Chairwoman Paulson reiterated on Wednesday that she expects the Fed to cut short-term interest rates later this year if the economy performs in line with her expectations of moderate inflation and a stable job market. In prepared remarks for a Philadelphia Chamber of Commerce event, Paulson stated, "My baseline expectations are rather modest," anticipating inflation to fall to around 2% by the end of the year, a stable job market, and economic growth remaining at around 2%. She noted, "If all of this happens, then some modest adjustments to the federal funds rate later this year might be appropriate." Regarding the job market, Paulson reiterated, "The labor market is clearly slowing, but it hasnt collapsed." She believes risks have increased, which is one of the key reasons she supported the FOMCs 75-basis-point rate cut last year.

S&P 500 (SPY) Tests Resistance At The 20 EMA

Cory Russell

Aug 26, 2022 16:42


Economic Stagnation Is Likely to Get Worse

For the American economy, the most recent S&P Global Flash US Composite PMI is not encouraging. According to the figure below, the headline Flash US PMI Composite Output Index decreased from 47.7 in July to 45 in August. It was the second consecutive month that the volume of all business activities declined. The production decreased at its sharpest rate since May 2020. In fact, Siân Jones, Senior Economist at S&P Global Market Intelligence, said that "the reduction in overall production was the greatest witnessed since the series started almost 13 years ago," excluding the pandemic period.


Additionally, it was widespread, with both manufacturers and service providers reporting decreased activity, however, intriguingly, service sector businesses saw a faster rate of drop. While the Flash US Manufacturing Output Index decreased from 49.5 to 49.3, the S&P Global Flash US Services Business Activity Index decreased from 47.3 to 44.1 in August.


Although the Flash US Manufacturing PMI fell from 52.2 in July to 51.3 in August, overall manufacturing activity remained in an expansionary range. The index, however, dropped to its lowest point in little over two years. It doesn't seem to be the finest economy in recent history when combined with two quarters of negative GDP growth.


What's going on with the American economy, then? Why is production decreasing? Who would have imagined that inflation and the Fed's tightening cycle are to blame? Increases in interest rates and rising prices have only served to diminish American consumers' actual disposable earnings. Producers weren't helped by supply problems including material shortages and delivery delays.


Oh, and speaking of growing prices, even if the pace of producer price inflation moderated, corporate expenditures were still driven up by rising salaries, transportation surcharges, and supplier costs. The negative effects of increasing mortgage rates are also evident in the fact that new house sales fell 12.6% to 511,000 units in July, despite the fact that this is a separate data.


This is consistent with what I said earlier: a recession (or a significant economic slowdown) is essentially unavoidable since either the Fed's tightening of monetary policy or inflation on its own will cause a fall in economic activity. As you can see, there is no true binary choice between inflation and recession. The real option is between a recession with high inflation and a recession with controlled moderate inflation. It has always been clear that excessive inflation would have a negative impact on the economy since it skews the economic system. This is precisely what we are seeing at this moment.


Regarding the future, I have bad news. Why? Even after it has peaked, inflation will continue to be high for at least a few months. Similar to this, the Fed will continue to be hawkish for a while even if it will lower the rate at which it raises the federal funds rate (at least until there is a big increase in the unemployment rate or a really serious economic crisis or strong recession). Therefore, the pressure on people's disposable incomes will persist, slowing the rate of economic development even further. The composite survey's new orders index decreased from 50.8 in July to 48.8 in August, marking the greatest dip in new orders in more than two years.

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