Market Recap - 5/12/23

The Fed
Fed’s Bowman “Should inflation remain high and the labor market remain tight, additional monetary policy tightening will likely be appropriate to attain a sufficiently restrictive stance of monetary policy to lower inflation...”
University of Michigan inflation expectations in May were mixed. The 1-year expectations (blue) eased slightly from 4.6% to 4.5%. On the other hand, the 5-10-year expectations (orange) increased from 3% to 3.2%, reaching their highest level since March 2011. I don't think the consumers are really feeling the disinflation yet.

As I have mentioned a few times, government spending and Fed's special lending facilities greatly compromised if not reversed Fed's QT operations. The Fed's liquidity drainage campaign has, thus far, largely failed, which has been beneficial for US equities.

The Economy
April import Price Index for the month showed a 0.4% MoM increase, slightly surpassing the expected 0.3%. The Import Price Index excluding Petroleum experienced a minor decrease of -0.1% higher than the anticipated -0.3%. Export showed a 0.2% MoM increase, aligning with the expected 0.2%.

However, looking ahead into May, In several of my previous post, I mentioned contracting economic indicators, including trucking and freight, commodity prices, and weak PMI in China and the EU in April, suggested a continued disinflationary trend globally. These factors could likely influence the import/export data for May, reflecting the overall economic conditions and the impact on prices.

Bank of America's detailed data reveals that household spending on credit and debit cards experienced a year-over-year decline of 1.2% in April. This marks the first negative reading since February 2021, indicating a slowdown in consumer spending.

Bankruptcies recorded so far this year have been the worst since 2010, although the margin of increase is not significant.

The housing market seems to have stabilized. Apollo: “The housing market has started to recover, and this is a problem for the Fed “. Although the rental market doesn't appear to be as hot, the SFH market is showing signs of stabilization. Realtor.com's April report indicated an increase in listing count compared to last year, although still lower than the 2019 level. Listing prices have decreased from their peak last year but remain higher on a year-over-year basis.

The Business
Bank of America's Michael Hartnett says it’s not yet time to buy equities as outflows accelerate amid elevated inflation and recession fears.
".. we’ve seen these post crisis rallies before, but a crack will come this year. Buy the first negative payroll print . .. $SPX up 11%, Nasdaq up 15% in 2 months after Bear Stearns Mar'08; .. just as then credit & tech lead a 10-week rally .."