Nick Hodge,
Publisher
Feb. 18, 2022
“Retail sales surged.”
That’s what most of the headlines said this week.
But stocks certainly didn’t surge.
The US stock market (S&P 500) is down more than 8% for the year as we enter the back half of Q1.
The retail sales number that the empty heads on TV are cheering this week was a 3.8% increase in January from December. A “faster-than-expected rebound,” trumpeted the New York Times.
That is the seasonally adjusted month-over-month number.
What no major media outlet or the government trumpeted was the year-over-year number, which was 12.9%.
Why wasn’t this number sung from the heavens?
Because while it was the 11th straight month of double-digit year-over-year gains in retail sales, it was the smallest gain since February 2021.
Does this chart of year-over-year US retail sales growth look like it’s surging to you?
If not, that’s because it’s not. Year-over-year growth — the real number that the market cares about — is slowing.
The same is happening with earnings growth and will happen with GDP. It’s down and to the right from the highs of last year.
We are in a growth slowing environment.
The Fed would typically cut rates in such an environment.
Jerome thinks he knows better, and the Fed still says it’s going to raise rates. I think that news is as fake as surging retail sales.
Gold is extra shiny this week as the US remains keen to keep Ukraine in the news as a convenient distraction from the one out of every ten dollars that just disappeared from most people’s retirement accounts.
The yellow metal touched $1,900 per ounce this week for the first time since last June. When gold hit $1,900 back in July 2020, it went on to hit all-time highs north of $2,000 per ounce within two weeks.
On the macro side of things I continue to position defensively.
If you’re a reader of Foundational Profits, you know we’re long large gold miners, have put some money in non-US funds where markets haven’t been as volatile, and are looking for bond yields to reach their zenith.
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