One of the drivers of inflation has been consumer spending, which is great, but they’ve been spending on goods vs services. As we have mentioned before, goods are very inflationary. We’ve shown charts going back months that shows that there has been a spike in goods spending over services. That’s largely inflationary because you must ship and store goods and they also have to be imported. We have a huge supply chain issue that is driving the prices. One way that could be fixed, that the Fed has nothing to do with, is consumer spending. We feel like the consumer needs to be spending more money on getting out of the house, going on vacations, traveling, and eating out more. We’ve been watching that data very closely and have some really good news. On a chart shown in this episode, it shows at the start of the year we had a drop in consumers spending money on services and more on goods. We saw a drop in restaurant bookings through open table, and we saw a drop in TSA throughput. It shows that people were traveling and going out to eat less. That is why it’s one of the leading drivers, potentially, and why we’ve seen inflation. We’ve started to see that trend increase and the reason we like to watch this data. This data shows what is happening now and not as much looking back. There’s a lot of the data that we look at from a GDP and jobs standpoint that is months, and sometimes a years in the rear-view mirror. This is real time data and something that could be an early indication of future inflation dropping. If the consumer continues to increase their spending on services, we may see some bottleneck. The good news is it’s not that the consumer is drying up spending, it’s just where they’re spending their money that could really help inflation, which would reduce the Fed’s need to be hawkish to raise rates and slow down the economy.
We received some disappointing retail sales data in December. If you remember, we talked about this on the vlog, and one thought process through that was that maybe the consumer was buying in October and November due to the assumed supply shortages. People were worried about getting their Christmas gifts on time and that theory played out to be true. In January, we saw a 3.8% increase in retail sales. That’s the fastest gain since March of last year and we’re up 13% compared to a year ago. This data shows that the consumer is back and better than ever and we’re thrilled that the consumer is spending money. Consumers are planning summer vacations and planning on taking trips that they didn’t get to go on due to the pandemic. Believe it or not, travel and hospitality might actually bring inflation down. This is something we will continue to keep an eye on.
Usually, we like to give short-term resistance and support levels for the S&P 500. On this President’s Day, we want to do something different and give you the intermediate support and resistance levels. What we’re looking at currently is an intermediate resistance level price of 4,630 and intermediate support level price of 4,280. What that means is if we were to break through the support level, that could indicate more of a bearish tone in the markets, and more of a bullish tone if the market crossed over the resistance level. We like to correlate fundamentals in with our technicals and will keep track of this as we move into the spring and summer months.
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