Per the synopsis below, our general conditions assessment was less bad week-over-week... Although there's nothing therein thus far that suggests to us that conditions are about to turn robustly positive.
That said, we do remain overall constructive, particularly on equity markets, over the next several months -- assuming present geopolitical angst begins to abate sooner than later -- the market action/reaction on the related headlines and associated commentary make that an easy call.
As for the latter part of the year, and beyond, however, we have to consider what happens if suddenly we get to move on without the proverbial "wall of worry" that typically accompanies sustainable bull markets... I.e., without some worry -- that inspires holding cash, shorting stocks, staying underweight, etc. -- where's the juice to come from to keep the market buoyant after everybody FOMOs, or YOLOs, in?
Well, you might say government, via spending, will provide the economic juice that'll ultimately find its way to markets... And I'd say, yep -- particularly in a populist macro regime -- that's clearly the political incentive... Thing is, what do you think the direction of inflation and interest rates might be in that scenario?
That my friends is the conundrum! They can keep the economy out of recession, but likely not without exacerbating inflation in the process.
That's the scenario we keep harping on.
Stay tuned... (PS, I'll be out of the office all next week, but not entirely disconnected... so, unless events compel me, it should be crickets herein till next weekend)
In the meantime, here's your weekly macro rundown*:
PWA Index — Week of May 18, 2026
Our proprietary macro conditions index improved modestly this week, recovering to −13.43 from last week's −16.42. The headline number is moving in the right direction, but we want to be precise about what that means: the index improved because several deteriorating readings found a floor, not because the macro environment turned a corner. The underlying picture remains one of an economy under meaningful stress.
The most important data point of the week had nothing to do with markets. The University of Michigan's final consumer sentiment reading for May came in at 44.8 — a new all-time low in a survey that has been running since 1952. The previous record, set during the 2022 inflation surge, was 50. Americans haven't felt this economically pessimistic in living memory, and what's particularly notable is that the final reading was revised sharply lower from the mid-month preliminary estimate, meaning conditions deteriorated further as the month wore on. Inflation expectations at both the one-year and five-year horizons also moved higher in the final revision — a development we are watching carefully, as sustained elevated long-run expectations can become self-fulfilling.
On the more constructive side, global manufacturing activity accelerated, our leading-to-coincident economic indicator ratio recovered sharply from its worst reading in months, and the labor market continues to hold. Weekly jobless claims remain historically low at 209,000, and the Atlanta Fed's real-time GDP tracker moved up to 4.3% for the second quarter. Nominal economic activity has not broken down.
The tension between those two sets of signals — a consumer at a historic sentiment low while broad economic activity remains resilient — is the defining feature of this environment. It is consistent with what prolonged energy price pressure does to an economy: businesses and aggregate output hold up longer than household confidence, but eventually the consumer's reluctance to spend becomes the economy's reality. We are monitoring that transition point closely.
Our portfolio positioning remains oriented toward the conditions the data continues to describe: real assets, energy infrastructure, and selective equity exposure in sectors with pricing power, balanced against dry powder and tail hedges that give us flexibility if conditions deteriorate further. We are not making aggressive directional bets in either direction until the path of energy prices — and the geopolitical situation driving them — becomes clearer.
This note is for informational purposes and is not a solicitation to buy or sell any security. Past performance is not indicative of future results.
*Prepared by Marty Mazorra, Chief Investment Officer, Private Wealth Advisors. Research synthesis and drafting assisted by AI tools under advisor review. All market views, analysis, and recommendations are those of the advisor.
No comments:
Post a Comment