When you talk about market fear with selling and a downtrend like the first half of this year, one usually begins with the VIX. Last Friday it closed at $26.70. Anything under $30 is not even in the fear category. The market's first indicator says no real fear on price. Then, you can chart the price action. This consistant negative trendline says there is selling in the market. Another strong indicator to which we, at Evolution like is volume. The down days have much stronger selling than the buying on up days. Market bulls should be aware and alarmed. We feel what is even more alarming is the price action on Friday. The bulls got a huge lift as the market reversed selling and ended up 321 points. However, when one looks at the week for a fuller picture, the market was down over 400 points and 1.28%. The volume was average. To us, this is a tell. The market had three keys for the bulls. The first was the calendar. The Fourth of July is always bullish. The second was the timing. The first of the month had new money with "window dressing." The other is the followers to the meme, "Buy the dip!" The volume on Friday was average. It is telling you that the bulls have no conviction. Not to toot our horn, but we predicted a Dow 29,000. Now, the real market concern is it falling to test the 2020 lows. With that said, our real concern is not for the market, but for our citizens. They are seeing fear in food, energy and shelter. They are hearing real fear with crime and the war in Ukraine. They are questioning (and rightfully so) our leaders and their decision making. Doubt is the relative and water that allows the seed of fear to grow.
Consumer Prices, Not Share Prices
Not everyone is involved with market share buying. They do the price action of our economy. When a citizen needs transportation other than public, he is looking at vehicles. Future shock is here. The average new vehicle cost over $47,000. In 1987, you could buy a 3/2 home for that amount. It doesn't get any better for used vehicles. They average around $22,500 this year. This is economic fear at its worse. The buyer cannot afford the price and there is no point in purchasing somebody else's headache. Just fix and put some tape on your old standby. The other fear is that individual's outlook. He cannot keep up economically and that is scary. Bottom line: car sales will fall and this shrinks our economy.
Housing and Rent
We are turning into rental nation as higher home costs, poor wage earnings and now, higher interest rates are locking people out of the "American Dream" of home ownership. Then, they see the price action in renting. It is a nightmare. Nationwide rents are increasing at record pace.We told you in past pieces that the moratorium on mortgages and rents is ending. Landlords are seeking lost revenues. In many cases, they too are behind in their payments. This is a contagious problem.
The medium monthly rent in May hit $1849. This is a rise of 26.6% since 2019 and we're talking before the pandemic. Feel for your Miami residents. Rent increased there by 40%. Ouch!
How Do They Live?
Consider low-wage earners. They are now spending 31% of their monthly income on gasoline or transportation and groceries. They need another 40 to 50% for rent. They have no wiggle room for utilities, phone and whatever else life throws at them. Then, if the economy slows, they face layoffs!
Meanwhile, market shills still proclaim the market will return 18%. Dear Reader, that is 47% higher than the price of the S & P 500 before the pandemic. Peace.
