CELENTE: Happy Days Are Not Here Again
The U.S. equity markets, as we see it, especially the tech-heavy Nasdaq are in jeopardy.
NOTE TO READERS: THIS ARTICLE WAS FOUND IN THIS WEEK’S ISSUE OF THE TRENDS JOURNAL. SUBSCRIBE NOW FOR HISTORY BEFORE IT HAPPENS
After being a bit upbeat prior to and following the U.S. presidential elections, consumer confidence in February hit its lowest level since the peak of the COVID War back in August 2021… when the nation was shut down and the population was freaking out.
Today, the Conference Board’s Consumer Confidence fell to 98.3 for February, down some 7 percent, well below the Dow Jones prediction of 102.3.
The Board’s senior economic analyst, Stephanie Guichard, said the data shows that the “Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income,” and that “Pessimism about future employment prospects worsened and reached a ten-month high.”
Further noting the decline in consumer confidence, last week we wrote that the University of Michigan reported a larger-than-expected monthly decrease in consumer confidence of 10 percent in February and the expectations for inflation to keep climbing over the next five years hit its highest level since 1995.
Hitting consumers in the pocket, and on a down note for the retail sector, last month U.S. consumers spent 0.9 percent less than in December, the commerce department reported, the largest one-month drop since March 2023. The spending figures are not adjusted for inflation, so the decline is even sharper than headlines would indicate.
Not High on Tariffs
At a press conference yesterday, President Trump said the 25 percent tariffs the U.S. will impose on Canada and Mexico “are going forward on time, on schedule” and that “the tariffs will go forward, yes, and we’re going to make up a lot of territory.”
This rise of tariff fear is also a factor, according to the Conference Board, as to why U.S. consumer confidence is dragging down.
There is concern that an aggressive tariff act will push inflation higher, which will in turn keep the Federal Reserve from lowering interest rates.
And, the higher interest rates stay the more sluggish the economy will grow.
Feeling the fear of tariffs, the Conference Board notes that consumers are worried as well with their expectations that over the next 12 months inflation will spike some 6 percent, which is well above the Fed’s 2 percent goal… a number that was invented by Fed-Head Ben Bernanke back in 2012.
Ms. Guichard said, “This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs. There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current Administration and its policies dominated the responses.”
The Upside and Downside
As we have long reported, since the “Bigs”, i.e. Robber Barons 2.0, have taken over America, the middle class has shrunk while the rich get richer.
Imagine being a Generation Z, Millennial or Generation X. With exception of a few of the X Generation (39-54 years of age), they have no idea of the true middle-class American when once-upon-a-time there were family-owned businesses in America, not the chains in control of the country from retail, health care, farms, construction, etc.
Indeed, as Forbes reported, back “in the 1950’s small business output accounted for roughly 58 percent of total domestic output. This number dropped to around 48 percent in the early ’60s, and by 1977, small businesses with fewer than 500 employees produced only 46.5 percent of business output in the United States.”
Now, according to the Small Business Administration, small businesses accounted for just 44 percent of U.S. economic activity.
Yes, back in the 1950s, there were no Walmart, Kroger, Target, Lowe’s, Home Depot, Staples, CVS, Foot Locker and other chains dominating the retail business… there were family-owned businesses, clothing stores, shoe stores, hardware stores, grocery stores, stationery stores, furniture stores, appliance stores, etc.
In trend forecasting, all things are connected. Therefore we note this “chain” of events to further understand that retail sales are going down because rather than owning your own business, or working for one, you now work for a “chain” and make a salary that is lower class pay. And, the lower the pay, the lower retail sales, which now account for some two-thirds of America’s gross domestic product.
The facts are in the numbers. The top ten percent spend more than the middle-class. As we report in this issue of The Trends Journal, according to Moody’s Analytics the top 10 percent of earners now account for 49 percent of all spending, up from 36 percent three decades ago… and the ten percenters accounted for almost one-third of the U.S. gross domestic product.
TREND FORECAST: This is a time of great uncertainty.
The U.S. equity markets, as we see it, especially the tech-heavy Nasdaq are in jeopardy. Love it or hate it, Trump’s tariff threats are being blamed for the risk of higher inflation. And of course, the higher inflation, the greater the risk of higher interest rates, and less of an opportunity to lower them… which equals Dragflation: declining economic growth and rising inflation.