Trying to make sense of the data, which keeps pointing to trouble ahead for the economy and markets even though the stock market refuses (for the time being) to do its job: After all the stock market is supposed to predict a slowdown or recession, but this cycle it just won’t quit (yet).

Here are some items that are pointing towards a reckoning.

According to the Federal Reserve (reported today):

Manufacturing output decreased 0.1 percent in January to a level 0.8 percent below its year-earlier reading. The production of durable goods moved down 0.5 percent in January, as drops for aerospace and miscellaneous transportation equipment and for machinery were partially offset by a gain for motor vehicles and parts.

Industrial Production Feb14 2020

This is the fourth drop in industrial production in 5 months.  You’ll note that the production of autos increased but what about sales?

TOKYO (Reuters) – Nissan Motor Co on Thursday cut its annual operating profit forecast by 43%, hit by a slump in vehicle sales and heaping more pressure on new management to fix a company still reeling from the scandal surrounding former leader Carlos Ghosn.

For the life of me, I can’t believe the scandal with Ghosn has anything at all to do with sales.  What I do believe is that vehicle sales have begun to slow globally.

Aircraft

Another early sign of a rough road ahead is business inventories.  Some strategists believe a buildup in inventory is a good thing – suggesting that sales are strong and more product is needed to sell.  This is ordinarily a sound theory.  However, at other times the build is because product isn’t selling (see the Nissan quote above).  Boeing reported no 737 Max aircraft sales yet again.

Business inventories in the U.S. rose a slight 0.1% in December after a 0.2% decline in the prior month, the Commerce Department said Friday. The gain was in line with Wall Street expectations. Sales slumped 0.1% in the month. Retailer sales were flat. (www.marketwatch.com/)
And finally, consumer confidence is at another breaking point.  If you haven’t read my post concerning how this is a contrarian indicator, then you should. When consumer confidence peaks, it spells doom for the stock market (or at least, the stocks that have provided its leadership over the past several years).

source: tradingeconomics.com

The University of Michigan consumer sentiment index in the US increased to 100.9 in February of 2020 from 99.8 in January, beating market forecasts of 99.5, preliminary estimates showed. It is the highest reading since March of 2018 amid improving expectations (92.6 from 90.5) while the gauge for current conditions declined (113.8 from 114.4). Inflation expectations for the year ahead were steady at 2.5 percent while those for the five-year outlook fell to 2.3 percent from 2.5 percent. Current personal finances as well as evaluations of the national economy each posted large gains, while views on buying conditions for household durables posted a significant loss.

Source: ‘https://tradingeconomics.com/united-states/consumer-confidence

About the Author

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.

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