🩺 How Healthy is the US Economy?

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What’s on the Menu 🍴

Fear seems to be everywhere right now…

And people are looking for answers!

Is the economy about to implode? Will Bitcoin crash from this all-time high?

Let’s dive into some analysis of the charts and macro data.

• How Healthy is the US Economy? 🩺

• Is This Bitcoin Bull Market Finished Or Just Getting Started? 🐂

• Technical Analysis Update: S&P 500 Index 📈

Today’s newsletter is a 6 minute read.

How Healthy is the US Economy? 🩺

Every week we get new datapoints about the state of the economy, but once in awhile it’s helpful to take a step back and look at the big picture.

Today we’ll do that, with a focus on the US economy. We’ll look at non-US economies in a follow up edition.

Here are some of the more important areas we care about:

🛍 Consumers

• Unemployment

• Retail Spending

• Savings & Debt Levels

• Credit Delinquency Rates

• Inflation Rates

• Consumer Confidence

• Home Prices

• Mortgage Rates

• Gasoline Prices

👩‍💼 Businesses

• Corporate Earnings

• Profit Margins

• Business Investment

• Interest Rates

• Credit Spreads

• Stock Prices

• Commodity Prices

🏛 Government

• Tax Receipts

• Spending

• Bond Yields

• Yield Curve

Each of these areas has a number of different indicators we can look at. We can’t touch on everything, but here are some highlights:

The Consumer:

In aggregate, US consumers appear to be in a healthy spot, with low unemployment driving modest growth in spending.

Redbook’s gauge of weekly retail sales growth has averaged +3% in recent weeks:

Weekly initial jobless claims also remain subdued:

Household net worth rebounded to a new high in Q4 2023, and will likely end this quarter higher as well given higher stock prices:

One area of concern remains consumer credit card delinquencies, especially for lower income consumers:

Inflation is a concern for some, though we’ve written about why this may be overblown.

Consumer sentiment overall is better than last year, but with room for improvement:

Businesses:

S&P 500 company earnings grew by about 4% last quarter, and are currently expected to grow between 3-4% in Q1 2024.

The market is expecting full year 2024 earnings growth to accelerate into the 10-11% range:

However, the outlook for growth among small businesses remains weak according to the NFIB surveys:

Interest rates and energy prices have ticked up recently, which may put incremental pressure on businesses, especially if expected rate cuts don’t come through by late summer.

Surprisingly however, new building permits have increased despite higher rates lately:

Another piece of good news for companies is that corporate credit spreads (the additional interest cost businesses pay on top of short term interest rates) remain low:

Higher stock prices don’t hurt either!

Service businesses appear to be doing well while manufacturing businesses continue to see relative weakness according to the ISM manufacturing & non-manufacturing surveys:

Mixed data from the corporate sector suggests some businesses are proceeding with caution at the moment, but overall conditions remain neutral to slightly positive.

Government:

Fiscal deficits are running above 6% of GDP in the US, which adds to government debt but also helps stimulate private economic activity in the US.

Ultimately the cost is borne unequally via inflation in parts of the economy.

Three changes this year could alter the level of fiscal deficits going forward: 1) Rate cuts 2) Elections and 3) Higher tax receipts.

All else equal, a combination of the above three factors could reduce the level of the deficit as a percent of GDP in the coming year.

That would pressure the economy on the margin if it comes to pass, but it could also be offset by lower interest rates stimulating the private sector.

Currently the market still expects the Fed Funds rate to end the year lower at around 4.5% versus 5.25% today:

That said, two year government bond yields have risen since the start of the year, which could be an incremental headwind to the economy (especially if the trend goes further):

The Conclusion?

All in all, the current picture of the US economy still looks okay.

Want more proof? The Atlanta Fed’s forecast of Q1 2024 Real GDP growth is currently at +2%.

There are certainly risks to economic growth that can derail this trajectory, but there’s not overwhelming evidence today of a coming recession.

As always, we’ll keep an eye on the fresh data and keep our Daily Dough readers informed!

Is This Bitcoin Bull Market Finished Or Just Getting Started? 🐂

Everyone from Bitcoin OG’s to new ETF buyers are wondering:

Is the Bitcoin bull run taking its final bow, or are we just gearing up for the encore?

Anything is possible, but if the charts and cycles have anything to say, I think the show's far from over.

Bitcoin's been riding the rollercoaster of its life, with ups and downs that would make even the bravest stomachs churn.

Yesterday I put out a video explaining my thoughts about the market.

And today I’m walking you through some charts here:

Bitcoin's journey has been marked by a rhythmic dance of bull and bear cycles, often closely tied to its halving events—a phenomenon that reduces the reward for mining new blocks by half, making Bitcoin scarcer.

Historically, these cycles have witnessed three bullish years followed by a corrective phase, a pattern that Bitcoin enthusiasts have come to anticipate.

Currently, Bitcoin stands at a pivotal juncture, exhibiting a departure from its traditional market cycles.

We find ourselves in what I call "phase two" of Bitcoin's market evolution. This phase is characterized by an accelerated growth trajectory.

The recent retracement from these highs has stirred a flurry of speculation and concern among investors.

But this pullback could be construed as a healthy consolidation, a breather before the next leg up.

Drawing parallels from historical data, similar retracements have occurred in past cycles, only to be followed by substantial rallies.

And the anticipation surrounding the upcoming halving event adds another layer of complexity to the current market dynamics.

The halving, expected to occur in the near future, has historically been a precursor to significant price appreciation, driven by the reduced supply of new Bitcoins entering the market.

So, to answer the million-Bitcoin question: Is this bull market donezo?

I could be wrong, but my chips are on "just getting started."

With the halving in the pipeline and Bitcoin's penchant for defying expectations, I'd say we're in for quite the spectacle.

One thing’s for sure - it's going to be a wild, volatile ride.

If you want to learn the right way to trade & invest bitcoin, join me Thursday night for a live master class.

Technical Analysis Update: S&P 500 Index 📈

The S&P is flirting with danger and euphoria at the same time.

We’ve been able to enjoy quite the healthy bull run in the index and investors have been feeling wealthier by the day.

But, as we often teach, we have to prepare for possibilities and probabilities going forward.

It may be time to be on alert for the S&P 500 to possibly take a breather.

Here’s what i’m seeing in the chart:

1. Every pullback we’ve had in the S&P 500 since November 2023 has been almost non-existent. They’ve been extraordinarily “shallow” and don’t even measure much when you pull a fibonacci retracement. This to me says that we’re over-due for a deeper correction and we should not be surprised when it comes.

2. Price has been moving with mini runs and retracements. We haven’t seen much true consolidation (where price moves sideways for some time). We’re finally seeing price moving sideways which could signal the market is getting “tired”.

3. Price is hovering closer to the lower end of the channel (red trendlines shown). If price breaks below the lower trendline of the channel, this could be where sellers step in to move us lower.

Any good bull trend needs to take a rest if you hope to have it last longer. So, the pullback shouldn’t be cause for panic, and if anything, it could bring some dip buying opportunities.

Could the trendline of support (and in turn, the entire channel) hold and we see new all-time- highs? Surely. It’s possible

Price is simply flashing signs that it’s trying to pick direction from here in a way that we haven’t seen in many months (probably since December’s tight-ranged consolidation).

I think price is getting too cozy with the trend line of support to not be on alert.

So, for POSSIBILITIES: We could hold the trendline of support and break to new highs continuing the channel.

However, for PROBABILITIES: It’s looking more likely we could break down through the support zone into the pullback zones simply from the signs price may be flashing.

Keep in mind, technical analysis isn’t about predicting the future perfectly- that’s really hard to do.

It’s more about using the clues in price to more accurately ANTICIPATE different major outcomes and reacting as major levels break (either higher or lower).

Price day by day makes a case stronger, or weaker. So we’re constantly evolving our opinions on possibilities and probabilities as active traders & investors.

The next few days will be very telling as the bull 🐃 and bear 🐻 battle heats up.

Food For Thought 🧠

"Life is either a daring adventure or nothing at all.”
- Helen Keller

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.