Economic Comments by Sector
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This appears to be a very unusual economy for an
election year. The consumer, home building and commercial
real estate are at the bottom. Agriculture, technology and
gold are strong. The world economy and energy remain healthy
as does manufacturing. The economy is slowing but
there are pockets of strength to offset some consumer weakness for now.
This slowdown is not from inventories but asset value
depreciation. This type of slowdown is unusual and is likely to take
years to correct. The debt on these assets could cause
problems. It is time for caution and realize we should muddle
through.
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The
Economic Sector Trends are
intended to give an idea of the direction of economic growth and where
the growth might be. They are not intended to give a specific
percentage of growth. They do tend to lead economic growth reports and
they can, at times, tell a different economic direction than what the
“experts” are saying. The 3 and 8 month moving
averages compared to the current month can show changes in trend
direction possible duration of the change. You should allow at least 2
months for a likely change indirection. Lower numbers are stronger
growth.
What to watch: longer
term growth can be followed by watching machine tools,
semiconductor equipment makers and heavy duty trucks. These show the
direction of confidence in future growth. International
shows whether world economic growth is rising or falling or stable. Exports shows
whether U.S. exports are likely to rise or
fall.
Jobs and consumer health are measured by:
Auto-Domestic
mixed
Consumer Purchasing
Home-building
Home Furniture and Appliances
General capital expenditure growth are measured by:
Mfg Material
Steel. Basic Material,
Computers
& Technology
Building Materials
Commercial RE Construction.
General economic growth are measured by:
Transportation
Finance
& Insurance
Advertising & Newspaper
Inflation
and interest rates can be measured by:
Gold
Energy
Agriculture
Electric & Gas Utility
Defensive market conditions can be measured by :
Food
& Household
Drug & Medical Supplies
Some sectors can be used in more than one area. (Energy and Utilities
can also show economic growth)
Bonds
& Gold: Gold is one of the best performing year
to date and one the few out performing the market. Gold usually goes up
with inflation or uncertainty; neither is good. Caution is advised.
The Averages:
Small still leads big and mid cap as
does value over growth. Mid and small cap make new highs while big cap
sits.
Country/Region:
Brazil, China and emerging markets are
out performing the market and the other parts of the world.
Growth and speculation are well and will stay that way as long as there
is excess liquidity.
The new highs show the world
economic growth may be increasing.
Sectors/Industries:
Energy is the only sector out performing
the market while consumer staples and finance are under performing.
Some kind of Energy should be
in most portfolios but it shouldn’t be chased. It’s
a major problem that will be solved over time. It remains a boring
market for most of the market.
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