The Resilient Consumer Is Pushing Off A Recession To Later This Year

February 26, 2023

As I get ready to head out to Las Vegas for Traders Reserve’s Investor’s Blueprint Live conference, I can’t help but look around me and wonder why everyone is talking about a recession. More about my experience in the airport in a second.

The American consumer found a second wind in January as the labor market remained hot and wages adjusted accordingly. That added up to more money in the pockets of Americans who were all-to-willing to spend versus save.

There are signs of some of the upper tiers of income downgrading their shopping to discount retailers like Walmart (WMT) or Costco (COST), but the net result is that consumers are still spending.

Income rose more than spending due to pandemic

BILL CONERLY BASED ON DATA FROM U.S. BUREAU OF ECONOMIC ANALYSIS

 

Even though the distance between Disposable income and Spending is shrinking once again, I think we could see a period of growth, albeit muted, in 2023. The resilient shopper is helping push off the recession until late 2023 or early 2024 when the line between disposable income and spending becomes razor-thin.

Back to my experience in the airport. Everyone I pass is staring at a phone or tablet while being connected to headphones or earbuds. There are families with snowboards and skis and others with golf clubs and other oversized luggage.

I am also surprised to see the Lululemon (LULU) leggings, seemingly new footwear, and top-of-the-line handbags. Maybe everyone gets dressed up to travel, but it certainly doesn’t give me the impression of a cohort prepping for a recession anytime soon.

Continuing down my path to the gate, I stopped off at the Delta Sky Lounge for a quick cup of coffee the place was packed, full of carefree travelers. While I don’t know the usual patterns at this airport, it certainly seemed plenty busy with people that were ready to travel to a destination and spend money – for work or leisure.

That said, let’s take a look at the S&P 500 from one technical perspective.

The S&P 500 (SPY) as shown below, had a hammer candle off the 200-day simple moving average on Friday. A hammer is an open and close near the top of the range, with a longer, lower wick. It’s a potential reversal candle pattern, and with the SPY above the 200-day SMA, it could mean a reversal to the upside is coming. Now we need to see follow-through.

What happens if we fall below the 200-day SMA?

Nothing good happens below the 200-day SMA. Even though there are still ways to make money, it’s much easier if the market holds its ground here. Think of it this way – defense can score in football, but that doesn’t mean you’d rather see them on the field when you need to score.

Let’s just hope the Traders Reserve Conference Curse doesn’t happen this time around. We have a great three days of speakers and presentations to get through! Although you may want to be ready to short the market just in case. 🙂

Now, let’s get you ready for the week ahead.

Monday – 8:30 am EST – Durable Goods – We’re expecting to see durable goods head negative from last month, but if you remove the large aircraft orders from last month, we’re seeing mostly flat readings.

Tuesday – 8:30 am EST – International Trade In Goods – The report is expected to show the U.S. Goods deficit to widen by an additional $1.3 billion to $90 billion.

Tuesday – 10:30 am EST – Consumer Confidence – After falling two points in January to 107.1, we’re expecting to see a slight uptick back to 108.4. The consensus range is anywhere from 105.4 to 110.

Wednesday – 10:00 am EST – ISM Manufacturing Index – The Manufacturing Index had been falling apart for months, but February’s numbers are looking to put an end to that for now. The index hit a reading of 47.4 out of 100 last month, but we’re looking for a 47.9 print this time around. The expected range is anywhere from 47 to 49. A reading under 50 still shows contraction.

Thursday – 8:30 am EST – Jobless Claims – The “bend, don’t break” job market continues to surprise each week. Last week saw lower-than-expected claims come in at 192k. It’s not surprising to see the estimate hit 200k this week, which would bring the 4-week moving average to 191.25k.

Friday – 12:00 pm EST – Raphael Bostic (Fed) Speaks

This is a lighter week compared to others, so we’ll see how the market wants to react to the news or lack thereof.

If you have any questions, comments, or anything we can help with, reach us at any time.
Email: [email protected]
Phone: (866) 257-3008

 

Jeff Wood

Editor, Filthy Rich Dirt Poor
Coach, Options Testing Lab

Any trade or trade idea discussed is for educational purposes only.  They will not be tracked as an official trade recommendation. 

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