Trouble on the Bull Market Highway

Amanda Heckman|July 7, 2023

“Objects in mirror are closer than they appear…”

So says the side mirror on every car on the road in the U.S. today.

And despite a red-hot first half of the year for the markets… the same could be said for the trouble that’s ahead.

Investors cheered as the markets closed out the first half of 2023 in the green. The Nasdaq posted its best first half… since 1983.

The artificial intelligence boom led the way… pulling many stocks up with it.

But we’re not here to tell you what you already know.

Our team is here to point out the objects folks are ignoring as they coast down the bull market freeway.

Just yesterday, Manward Financial Digest‘s newest contributor stepped out from many years behind the scenes. In his debut essay, Anthony Summers expertly dismantled the belief that a roaring stock market means all’s well with the economy.

No… if you want to know what’s really going on in the economy, then you need to look at the bond market.

And from that angle… the scenery out the window is a mess. With the spread between short-term and long-term bond yields the widest it’s been since the ’80s, there’s plenty of reason for concern.

Anthony explains it all right here.

Let’s stick with interest rates for a minute…

The Fed refrained from raising rates at its June meeting. The markets and consumers took that to mean rate hikes could soon be seen in the rearview mirror… and that inflation was conquered.

Consumer confidence soared in June as a result.

But that confidence is sure to be short-lived.

In remarks yesterday, Jay Powell said more rate hikes are coming. After all… the jobs market is still booming. U.S. companies added almost half a million jobs last month, the most in over a year.

That’s one battle the Fed is still losing as it tries to bring down inflation…

Which is still running higher than the Fed’s target of 2%.

Oof.

Meanwhile, the housing market is living in Crazytown as limited inventory and strong demand are keeping prices high. Higher rates have not cooled this sector down… and now we have an affordability crisis as would-be homeowners are priced out of the market.

And the manufacturing sector continues to contract (the Purchasing Managers’ Index numbers for June were worse than May’s)… thanks to weak demand and slowing production.

Plus, let’s not forget that consumer debt passed $17 trillion for the first time and credit card debt is holding at record highs near $1 trillion.

Do these sound like markers of a healthy economy to you?

Hardly.

That’s why, as Andy wrote on Monday, you have to dig deeper to see what’s going on.

Ignorance is a powerful, mind-numbing narcotic. It leads to bad choices. It leads to haughty decisions. And it’s what has kept the gals of The View employed for far too long.

Don’t let the market’s bull run convince you all is well. Trouble is just around the bend… and it’s closer than it looks.