Cracks in the Economy

I want to be careful how I word this. From my view, the U.S. economy looks very good at the moment. On Friday, we’ll get our first look at Q2 GDP, and it could be a very good report. Expect to see some POTUS tweets if the report is strong.

Forecasting the economy is hard, but there are a few early warning signs. None are perfect. One of the best is the yield curve, and that’s gotten much flatter lately. Still, there have been times when the economy has jogged along for more than two years after the curve has gone negative.

Another warning sign is oil. Prices tend to spike before recessions. Or rather, the spikes may help cause the recessions. West Texas crude is down to $68 per barrel, but it was over $74 recently. That’s a big jump from last June when crude was at $42 per barrel. That eats into consumer spending.

Another concern is real estate. Today’s new-homes sales report was below expectations. It was the weakest in eight months. On top of that, the previous three months were all revised lower. We’ve also seen weak housing data from certain areas. Southern California, in particular, has been quite weak.

The housing market could rebound, but I am concerned that economic growth may be peaking out right now.

Posted by on July 25th, 2018 at 2:09 pm


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