Is the economy already tanking?

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superrific

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Wal Mart stock fell 7% yesterday despite excellent 2024 results, because of lower guidance as to sales this coming year: "Our outlook assumes a relatively stable macroeconomic environment, but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions."
 
I'm surprised that fairly bland Wal-Mart statement made its stock fall 7%. That statement is nearly identical to the big-picture forecast for the year my financial advisor gave me, and candidly I thought it was a fairly optimistic take. The statement essentially says: the US economy remains strong, but there's a lot of worldwide geopolitical uncertainty. Who could possibly disagree with that or find it surprising?
 
I think there’s a decent amount of variance right now. I saw a tweet from someone in the airplane scrapyard industry and he said business is booming.

More seriously Inthink it’s difficult to say. If Trump delivers massive spending cuts and massive deportations it should have a negative economic impact, but we don’t know that he’ll actually deliver on those promises.
 
While playing intramural basketball at UNC, we had a few guys who couldn’t make the game, and we showed up with only five players.
Our worst player (let’s call him Robert) got 4 fouls in the first half. We made it a point to tell him not to foul anymore, but he picked up his fifth early in the second half. Despite our team being more talented than our opponent, we were down a couple of baskets when Robert fouled out.
We ended up winning the game by double-digits going away.
Trump is like Robert. Stop trying so hard and fouling everything up for everyone else. Go have a seat on the bench and everything will be fine.
 
I do not think that is a sign of economy tanking Super. I've seen you say it yourself (correctly) that the one thing markets do not like is "uncertainty." I have been surprised that the markets have held up so well with so much uncertainty, and the S&P trading over 20 times earnings, or P/E. This is a good bit higher than historical average.

Roughly 75% of companies reporting Q1 earning so far, have beaten estimates. Companies HATE missing estimates, due to market perceptions. So, many companies most likely will reduce estimates, even with strong Q1 earnings, due to this uncertainty.

The economy does not appear to be tanking, yet. Q1 earnings are in line with projected 12% EPS growth. However, with more companies being cautious and lowering full year guidance, the market is responding.

The next HUGE data point is the next monthly inflation report. We've already had one monthly bump up to 3% year over year. If next month's report goes even higher, prepare for a much needed 10-15% correction. If it goes back down, the market euphoria may pick right back up.
 
ChileG said:
While playing intramural basketball at UNC, we had a few guys who couldn’t make the game, and we showed up with only five players.
Our worst player (let’s call him Robert) got 4 fouls in the first half. We made it a point to tell him not to foul anymore, but he picked up his fifth early in the second half. Despite our team being more talented than our opponent, we were down a couple of baskets when Robert fouled out.
We ended up winning the game by double-digits going away.
Trump is like Robert. Stop trying so hard and fouling everything up for everyone else. Go have a seat on the bench and everything will be fine.
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Trumps economy is going to be gang busters. When you have a president like him, businesses are going to love him. But the issue is always the next guy. In four year groupings it’s great but you’d wish our president was more strategic for the long term. Strategic and Trump don’t mix. Biden did an amazing job last time handling inflation and getting it under control coming off the pandemic. I’m sure Trump will enact business friendly policies and the market will go up and it’ll seem to be amazing but likely will correct in time and that’s when it’s ugly.
 
HintonJamesHeel said:
Trumps economy is going to be gang busters. When you have a president like him, businesses are going to love him. But the issue is always the next guy. In four year groupings it’s great but you’d wish our president was more strategic for the long term. Strategic and Trump don’t mix. Biden did an amazing job last time handling inflation and getting it under control coming off the pandemic. I’m sure Trump will enact business friendly policies and the market will go up and it’ll seem to be amazing but likely will correct in time and that’s when it’s ugly.
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Don’t see anything wrong with what you are saying (except maybe that the Trump economy could/may be gangbusters if we are talking about the stock market). Too many unknowns at this point to make any kind of prediction on what will happen in the long run.
 
Kraftyheel89 said:
I do not think that is a sign of economy tanking Super. I've seen you say it yourself (correctly) that the one thing markets do not like is "uncertainty." I have been surprised that the markets have held up so well with so much uncertainty, and the S&P trading over 20 times earnings, or P/E. This is a good bit higher than historical average.

Roughly 75% of companies reporting Q1 earning so far, have beaten estimates. Companies HATE missing estimates, due to market perceptions. So, many companies most likely will reduce estimates, even with strong Q1 earnings, due to this uncertainty.

The economy does not appear to be tanking, yet. Q1 earnings are in line with projected 12% EPS growth. However, with more companies being cautious and lowering full year guidance, the market is responding.

The next HUGE data point is the next monthly inflation report. We've already had one monthly bump up to 3% year over year. If next month's report goes even higher, prepare for a much needed 10-15% correction. If it goes back down, the market euphoria may pick right back up.
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Right. Q1 earnings reflect December/January results. That's not what I'm talking about. And you are right that markets hate uncertainty. But that's why I focused on Wal-Mart's guidance.

Here's what I see: consumer confidence plummeted in February and inflation expectations went up. I don't spend much time looking at macroeconomic indicators any more, so those are the primary ones I've seen. And I'm wondering if W-M is seeing the same thing I am in that data.

People are scared. They are scared of tariffs. They are scared of layoffs. It's not only that 100,000 federal workers are losing their jobs (not that big a number in terms of the macroeconomy), but the rest of people who are scared. If you might get fired suddenly for no reason, maybe you pull back your spending. And I have no idea how the grant money being withheld flows through the economy.
 
Well, one correction to my post Super, I think most of the info I shared us actually based on Q4 earnings. Most, not all are on a March, June, Sep, Dec qtrly reporting schedule, with Dec being year-end. But some companies are different and even have year-ends and quarter ends in Feb or any other month.

"Earnings Season" can last anywhere from 2 weeks after quarter close to over a month.

So in any case, much of these reports coming out are based on the prior 1 to as much as 4 months data in the past.

As for "people being scared" -- yes, the market being down today is a carryover from yesterday, but a report out this morning also shows that consumer sentiment is down.

I also read this morning that Meta (Facebook) has shed 5% of it's workforce, just as it announces increased bonuses for top execs. It's sort of a microcosm of what is coming for those ignorant uneducated Trump voters. He doesn't care about them and they will pay, as his billionaire buddies make out like bandits.
 
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There is definitely some wobble right now but not sure things are tanking just yet.

The Trump Administration is creating uncertainty that undermines a robust bump you might otherwise get from having an election settled and policy expectations resolved for four years. His “I’ll do it in two weeks” schtick is continuing to cause caution about tariffs, the massive and erratic government cuts could undermine a lot of industries and radical changes to foreign policy are rattling certain economic sectors.

Meanwhile, for all their shock and awe, the Trump team has done very little to address the cost of living issues that working class and middle class voters are most concerned about. And talk of cutting mandatory spending on Social Security and healthcare programs is starting to scare people.

But some industries (crypto, steel, fossil fuels) are getting boosts and there is time for things to settle down if the GOP can pull together a budget proposal that has a chance of getting passed.

If the government mass layoffs (which almost have to cause a spike in unemployment rates eventually, which could spook people) start to be followed by private employer layoffs, consumer sentiment (which is already dropping due to uncertainty about inflation) could go off a cliff.
 
Kraftyheel89 said:
Well, one correction to my post Super, I think most of the info I shared us actually based on Q4 earnings. Most, not all are on a March, June, Sep, Dec qtrly reporting schedule, with Dec being year-end. But some companies are different and even have year-ends and quarter ends in Feb or any other month.

"Earnings Season" can last anywhere from 2 weeks after quarter close to over a month.

So in any case, much of these reports coming out are based on the prior 1 to as much as 4 months data in the past.

As for "people being scared" -- yes, the market being down today is a carryover from yesterday, but a report out this morning also shows that consumer sentiment is down.

I also read this morning that Meta (Facebook) has shed 5% of it's workforce, just as it announces increased bonuses for top execs. It's sort of a microcosm of what is coming for those ignorant uneducated Trump voters. He doesn't care about them and they will pay, as his billionaire buddies make out like bandits.
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I didn't even see today's report on consumer sentiment. I had only seen the previous one. I don't know a lot about the consumer confidence index. Is the absolute reading all that important, or is it primarily the changes? If the absolute reading is important, what's good and not good?
 
nycfan said:
There is definitely some wobble right now but not sure things are tanking just yet.

The Trump Administration is creating uncertainty that undermines a robust bump you might otherwise get from having an election settled and policy expectations resolved for four years. His “I’ll do it in two weeks” schtick is continuing to cause caution about tariffs, the massive and erratic government cuts could undermine a lot of industries and radical changes to foreign policy are rattling certain economic sectors.

Meanwhile, for all their shock and awe, the Trump team has done very little to address the cost of living issues that working class and middle class voters are most concerned about. And talk of cutting mandatory spending on Social Security and healthcare programs is starting to scare people.

But some industries (crypto, steel, fossil fuels) are getting boosts and there is time for things to settle down if the GOP can pull together a budget proposal that has a chance of getting passed.

If the government mass layoffs (which almost have to cause a spike in unemployment rates eventually, which could spook people) start to be followed by private employer layoffs, consumer sentiment (which is already dropping due to uncertainty about inflation) could go off a cliff.
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Crypto is not an industry, but sure. Steel and fossil fuels are, for the time, good. But both will fare poorly in an economic slowdown.

I shouldn't have used the term tanking. It might be the start of a tanking but we wouldn't know just yet.

There's a real risk of confirmation bias in what I'm thinking right now, but it seems to me that the economy is sort of doing what I predicted it would (not just me -- lots and lots of people). I had expected more tariffs sooner, and had not expected mass government layoffs, but the end result is similar: higher interest rates, higher inflation, waning confidence.

I wonder if Trump will actually go forward with the tariffs. He keeps announcing them, but delaying the implementation. Classic Trump. I have no doubt that he wants to do them, but will his advisors say, "um, yeah, don't do that right now"? Will he listen?
 
superrific said:
I didn't even see today's report on consumer sentiment. I had only seen the previous one. I don't know a lot about the consumer confidence index. Is the absolute reading all that important, or is it primarily the changes? If the absolute reading is important, what's good and not good?
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It is not so much the absolute figure, the change is far more important. The survey released this morning (The Univ. of Michigan Consumer Sentiment Index (MCSI) was down 10% over prior month. Anything greater than a 5% move is considered significant, with a 2% sampling error. This particular index randomly calls and gets just 500 responders to 50 questions.

The more accepted and generally used consumer confidence index (CCI) is from The Conference Board, an indy research group. They contact 5,000 each month, and seek the same type of data.

Both are started and pegged to a certain year, which started the reading at 100. So there is an actual score, but it is the trend in either direction month to month that is most important.

Manufacturers and retailers actually take these trends into consideration for production and inventory planning, perhaps even hiring and layoffs. Although, there is much much more involved, as I am sure you are aware that supply chain logistics have become very complex and advanced.
 
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