You may recall that in January the holiday retail season had a confusing stat. The last government report by the Commerce Department stated that retail sales fell in December. The market felt that this report would be revised to a positive. They were wrong. In fact, it was revised even lower.
Before this news market belief is one factor in the rise in the market since the Christmas Eve low. The market received more conviction of its thinking when Redbook reported surging retail sales. The market got a second when Master Card also saw rising sales. Now, the market is getting some doubt. Not here! We offer this:
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Walmart had a strong quarter. The bulls used the earnings report to push this market back to resistance level. At this point the market could test its old highs, consolidate or take the elevator down.
Other Factors
It is no new news that the Federal Reserve has decided to pause their attempt to return interest rates to normal levels. We, at the Evolution of Democracy all agree in one point. The Fed cannot go up past 3.75%. The debt service to our government, our corporations and citizens would approach unrepayable. No one will admit it, but fiat money always fails and our nation is reaching that inflection point with fiat debt.
Bottom line: The Fed has failed. It is on pause to hike and, or possible cut. Now, consider this: could all those positive earnings reports suddenly, go on pause?
Indicators
The first crack was reported by Apple. It not only missed on revenues, but this happened during its best selling period.
All those return items from the Christmas season has effected the earnings of retail. The nail in the coffin came from a government report. They are back to work. It verified the Commerce report. Sales declined in December. Macy's, and a host of other large retailers had a poor Christmas.
In a related aspect Bank Rate reported that 7 million car loans are past 90 days. Let me repeat that, seven million consumers are behind and delinquent in their auto loan. This is going to slow the economy even further. In addition, consumer debt is at an all-time high at $4 trillion. That scary number does not include mortgage debt. Also, credit cards in circulation has risen by 13% to 430 million since 2015. This figure is also an all-time high. The average card borrower has $5,736. in debt which is up 7.5% since 2015 according to Trans Union. In a sad survey, 40 million Americans already believe that they will miss at least one credit card payment. This means people are only making the minimum payment. It also turns $5 grand into $6,372. with interest. Not good.
As JFL stated, the consumer is no longer consuming. By becoming aware of the 800,000 furloughed government employees who generally had a better paying job than most folks, and who could not make ends meet with missing one paycheck, has opened the consumers eyes to recall the financial crisis of 2008. The consumer is turning into a saver. A new report shows that savings in America rose 7.6% from December. Could this momentum end the disposable society? I can only hope so. Peace.
