The MACRO Says We have a Ways to Go

A look at the consumers economic health and some stocks

I wanted to share some information that I have been thinking about and watching. My process is MACRO based. I am looking at what makes the economy flow. I am bearish on the economy and markets as well. I do believe there are places that you can invest in that will make money as index’s fall. I share that allocation to paying subscribers for $11.99 a month.

Let get into it!

M2 Money Supply has continued to decline. M2 is a measure of the U.S. money stock that includes currency and coins held by the non-bank public, checkable deposits, and travelers' checks along with savings deposits, including money market deposit accounts, small time deposits under $100,000, and shares in retail money market mutual funds.

The way I interpret this is the amount of money supply available is declining causing the shrinking spending.

The Personal Saving Rate has increase recently but is still overall low. This could be what is contributing to the M2 Money Supply decline. As I am looking at this chart I spot the massive jump back in April 2020. Households became flush with cash and the markets rallied for two years. Over the last twelve months that savings rate has declined as well as the markets.

Credit Card Delinquency's are increasing up through 4th quarter of 2022. Waiting for new data. I expect those numbers to jump higher as the consumer becomes tighter and tighter on household income.

Charge Off for Credit Cards Loans has jumped in the 4th quarter. This is when a credit card loan is no longer being paid on and the bank or credit card company takes it as a lose. Still waiting for updated data. I suspect that we will see more.

Commercial and Industrial Loans are declining. The amount of these loans being issued has declined since October of 2022. I interpret this in two ways. One, lenders are tightening up their lending standards because of the risk they are seeing in the economic cycle that we are in. Two, corporations are backing off due to the cost to barrow. Setting aside projects because of the cost to implement them. I expect this to continue to decline.

Real Gross Domestic Product show signs of decline. The previous charts demonstrate the decline in money supply, lending and savings rates which eventually will contribute to a decline in Real GDP.

Stocks

Apple is the largest stock held. It has continue to hold index’s up year to date. But what happens if/when Apple disappoints on year over year earning, revenue along with increase in cost of materials? I believe this could be what pushes markets and index funds south.

Microsoft has had a big boost due to ChatGDP3. Yet those advances most likely will not translate in near term EPS / Revenue growth. Its to early in the AI process.

Meta has had an amazing run this year. Meta may get help from Congress if the Restrictive Act that could ban TikTok is put in place. Yet we have to keep in mind that if the herd runs for the doors, Meta will follow.

Amazon is a consumer discretionary company along with proving web services. As the consumer gets tight on money they stop spending as much. That effects companies that provide products and services. Amazon is being and will continue to be effected by this.

Nvidia has been in the spotlight due to their AI semiconductor chips. As the demand continues to grow for AI, Nvidia will benefit. I am cautious at this time. It goes back the weakening foundation of the economic system. If that breaks down, so does the demand for AI semiconductors.

Conclusion

If the foundation of the materials that make up your home begin to weaken and break down, the first and second floor will come crashing down eventually. Our economic system has been propped up by cheap money provided by central banks. That cheap money has now become expensive money. The actions of the Fed, retracting that money supply, will and is slowly our economy. If the Fed continues to push rates higher at the same rate as they have over the last year, markets will fall. They did this in 1928 and something similar during Paul Volcker did in the early 1980’s.

Preserve your wealth.

Trent