The market turned around mid-afternoon when news arrived that the Fed’s Beige Book showed sluggishness in the economy is still of concern.
The Federal Reserve’s Beige Book indicated that most districts were seeing the same “modest” or “moderate” growth through the end of May. This is the same sluggishness that we, as consumers at any rate, keep complaining about. Aside from Christmas when did you last see tons of shoppers flocking to the mall?
If you look at the S&P chart below you can see the pop in the market around the time the Fed Report was released. Nice little bit of buying creating another overbought signal which members know what I was buying at that time.
Same Old, Same Old
Basically the report showed same old, same old outlook of some growth, mediocre consumer involvement, more employment but poor wage gains. Chicago and Kansas City districts reported slowing growth and Dallas reported minimal growth.
The New York Fed reported flat activity. Overall you have to question whether the Fed would raise rates in the face of these kinds of reports or whether they want to get ahead of what they might think is a move up in inflation that could be “coming soon”.
It is probably anyone’s guess but my outlook is probably no rate increase in June until they see more reports. Last week’s inflation data though did catch the attention of investors and the Fed so who knows, maybe by mid month we will see a rate increase.
Auto Sales Disappointed
GM auto sales were poor and Chrysler sales were down about 6%. These keep pointing to anemic growth but still some growth.
Inflation Is Imported
The problem I see with inflation is that it is usually imported and until the rest of the globe picks up economic activity, it will be hard for inflation to kick in.
I think there is really no change to the trading outlook. I am continuing to apply my capital and growing my portfolio through using strategies like the Tomorrow’s Trade Portfolio which this year is already up over 23% overall.
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