Less than two weeks ago, the S&P 500 closed at a record high. Today, the S&P 500 closed within seven points of that level. Pretty uneventful ten days wasn’t it?
Looking back over the last two weeks, a scan of newspaper headlines over the period shows just how big a story the 5% handle on the long bond was. While you would expect the story to be covered in the major national publications, it also found its way into the papers of smaller local cities, many of which probably do not even have business sections. Perhaps the most telling headline in the list is the last one, “Fund Managers Braced For Higher Rates”. When everyone is expecting the market to go one way, there is usually a good chance that it will go the other way.
The impact the CPI is having on the consumer is real. The correlation between CPI and Non-Durable Goods(items such as food and gasoline) is amazing. There is less income for discretionary spending.
For the first time in decades, the proporion of Durable Goods vs PCE is diclining even as wages increased strongly from the 2001 recession. A change in consumer behavior is taking place.
Posted by: will rahal | June 16, 2007 at 06:32 PM