#INFLATION HERE SOME REASONS OPTIMISM PROFESSIONAL#

#INFLATION HERE SOME REASONS OPTIMISM PROFESSIONAL#

Whether it’s a professional forecaster anchored in a faulty prediction, a politician seeking to undermine an incumbent, a news media organization chasing clicks, or a narcissist posting nonsense on their social media platforms for the sake of engagement, there are unfortunately too many reasons why people are out there pushing views that are corrupted by bias. Step 4: Beware the motivations of those communicating the information ⚠️Įven though the balance of the economic data may convincingly support one narrative, there will never be a shortage of people arguing otherwise. And sometimes, these periods will prove to be anomalies.įor more on all this, read: Let's not lose our minds over one month's economic data 😵‍💫 and The markets and the economy are 'full-on Monet' 🖼️. The markets will have weeks, the economy will have bad months, and companies will have bad quarters. In the real world, nothing - especially trends in the markets and the economy - develops in the form of smooth, straight lines. Step 3: Be mindful of short-term noise 🙉Ī turn in one day’s, one week’s, one month’s, or even one quarter’s worth of data doesn’t always confirm a change in prevailing trends. In other words, while there may be some truth to this trading down behavior, it appears to be an anecdote that unfortunately doesn’t reflect the great macro narrative. But sometimes, industry analysts and even Walmart management will say some of the incremental sales growth is coming from budget-constrained consumers trading down from pricier retailers - a sign that the economy may be in decline.ĭespite months of stories about how consumers have been 'trading down' (see here, here, and here), broad economic metrics have consistently confirmed the consumer has actually been healthy.

As the country’s largest retailer, you might assume strong sales reflect a strong consumer. Rather, they reflected issues that were largely isolated to a sector that reflected less than 5% of employment.Īnother example is the ambiguous signal from Walmart’s sales. The big tech layoffs didn’t signal bigger problems for the economy. But in those same months, net job creation in the economy persisted, aggregate measures on layoff activity remained low, and most other broad measures of activity held up. A great example of this is when the big tech companies were announcing mass layoffs during the latter part of 2022.įor months, news of these high profile layoff announcements made for alarming frontpage headlines. If an economic metric, a company’s earnings announcement, or some other news is in line with your macro framework, then congratulations: You just got confirmation that your macro narrative makes sense.Īt the same time, it is often the case that individual companies - or even a group of companies - may say something that conflicts with prevailing narrative. These economic tailwinds have been reflected in related trends like persistent job creation, resilient corporate earnings, and ever-increasing spending.įor more, read: 9 reasons to be optimistic about the economy and markets 💪 Step 2: Determine if the news is a macro story or an idiosyncratic story ⚖️ That’s followed by a section where I put it all together, synthesizing the macro narrative in TKer’s view - which by the way hasn’t changed much week to week or month to month in the last year or soįor a long time, the macro story has been one defined by excess demand, confirmed by elevated job openings, record-high business investment order activity, and unusually strong consumer and business balance sheets. I explained that for TKer, the first step is to have a robust macro framework.Įvery Sunday, I provide subscribers with a review of macro crosscurrents, in which I compile a variety of macro metrics from the previous week. When I was on Bloomberg’s 'Lots More' podcast two weeks ago, co-host Tracy Alloway asked how I balance the signal coming from individual companies against macro trends. Step 1: Have a robust macro framework 🖼️ To be clear, this isn’t about being optimistic for the sake of being optimistic. It’s no secret that TKer has been embracing the more positive view with most metrics. So the question becomes: How does one decide between the positive interpretation versus the negative interpretation?

The truth is that all of these interpretations carry some theoretical weight.

Inflation here some reasons optimism