What Was Missing From the Latest Economic Data

|October 29, 2022
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Are you taking advantage of the latest bear market rally?

Move fast… because the opportunity will be fleeting.

Over the past week, the S&P 500 has rebounded 5%, buoyed by certain earnings reports… (none from Big Tech).

And the markets were relieved to find out that third quarter GDP was in positive territory. (If you don’t look too closely.)

It’s just as our own Alpesh Patel predicted in late August. Based on the data he looks at daily as a hedge fund manager, he thought markets seemed sure to rally after another move downward.

After a drop in September… and a rocky start to October… here we are.

These rallies are perfect for quick, short-term trades…

Emphasis on short-term.

Because while we’ve gotten some better news this week, there’s still a lot weighing on the markets… and the economy.

We’ll start with the earnings reports we mentioned up top. While Big Tech posted some very disappointing results… many companies reported solid gains.

Mastercard (MA) beat expectations on revenue and earnings thanks to strong consumer spending and travel picking up…

McDonald’s (MCD) beat estimates for earnings and revenue…

And Shell (SHEL) doubled profits over the same period last year… and announced it would buy back $4 billion worth of shares and increase its divided by 15%.

Sounds great… when you take it all at face value.

But here’s the thing… Wall Street lowered its expectations across the board as market headwinds got stronger. So it was far easier for companies to beat those expectations.

Low Expectations for Earnings Growth in Q3

These earnings beats and the rising market hardly mean our troubles are over. As Andy told Manward Letter readers this week…

This doesn’t mean we’ve reached the end of the bearish sentiment. It doesn’t mean we can stop worrying about what the Fed is doing… or the result of midterm elections… or the threat of World War III… or the outsized strength of the dollar… or politicians gone crazy… or the weakness in the Treasury market… or surging prices… or a weakening jobs market… or a recession.

In sum: The rough times are far from over.

The Commerce Department reported this week that U.S. GDP grew at an annualized rate of 2.6% in the third quarter. This was received warmly after two quarters of negative growth.

But as always… there’s more to the story.

This growth merely made up for the economy’s contraction in the first half of 2022, putting us at net-zero growth for the year.

Our economy has stalled out.

Investment in the residential housing market contracted for the sixth straight quarter… plunging 26%. And this is sure to get worse – mortgage rates are above 7%, their highest level in two decades. (And more than twice as high as they were just one year ago.)

Growth in consumer spending slowed to 1.4%. And considering the U.S. consumer accounts for more than two-thirds of our economic activity… that’s not good news.

For months, Washington pointed to strong consumer spending as a sign that our economy was just fine.

Well, no more. Rising costs, climbing interest rates and stubbornly high inflation are taking their toll.

There are plenty of signs that there’s more pain to come… but it’s clear any positive news will give the markets a boost.

Smart investors should look for quick, short-term opportunities when that happens.

Note: Alpesh just released details on what he’s doing with his own money in light of the trouble ahead. He’s mastered a secret, powerful market signal… and it’s helped him turn every $1 million into $5.92 million since the Great Recession. See how you can put this signal to use today.

Amanda Heckman
Amanda Heckman|Editorial Director

Amanda Heckman is the editorial director of Manward Press. With unrivaled meticulousness, she has spent the past dozen or so years – give or take a few sabbaticals – sharpening Andy’s already razorlike wit. A classically trained musician and a skilled writer in her own right, Amanda takes an artistic approach to the complex world of investing. Her skill has led her to work with numerous bestselling authors, award-winning financial gurus and – lucky for us – the fine folks at Manward Press.