Has the economy peaked?

The pandemic is a year old [Click to view in browser](. Earnings central - [Amazon (AMZN)]( - While Amazon beat on the bottom line it missed revenue estimates for the first time in Q3 since 2018. - [Exxon Mobil (XOM)]( - 2010’s company with the largest market cap beat both top and bottom line expectations. Market conditions improved substantially including a rise in oil prices. - [Caterpillar (CAT)](- Even though Caterpillar beat on the top and bottom line, driven by a global recovery, shares traded lower in the premarket...and no one can really explain why. - [Proctor & Gamble (PG)]( - The markers of Tide beat top and bottom line forecasts. But, they warned of continuing inflation as input costs rise. - [Pinterest (PINS)]( - Shares of Pinterest got demolished as the company said monthly average users declined. It didn’t matter that they beat both top and bottom line estimates. Consumer goods manufacturers continue to highlight inflationary pressure. Many will throw out the worst case so they can beat lowered expectations the following quarter. --------------------------------------------------------------- 5 Years From Now, You'll Probably Wish You Bought This Company Why are so many investors buying up a small company that most people have never heard of? This company has seen its revenue explode, but you can still buy it cheap. [Click here to learn more](Sponsored --------------------------------------------------------------- Market moving stories you missed: - [Worker Pay Rises Strongly As Businesses Fight To Fill Jobs]( - [SEC Halts Chinese Company IPOs Citing Elevated Risks]( - [U.S. Extends Border Closure As COVID-19 Spreads Among The Unvaccinated]( - [Mastercard Expands Its Cryptocurrency Offerings]( --------------------------------------------------------------- We may have peaked - Many companies are back to ‘normal’ - GDP grew at 1.6% in Q2, but estimates for Q3 are sky high at 9.2% - Fiscal stimulus will fade - Housing is starting to show weakness - Delta variant isn’t priced in We knew that year-over-year comps would look amazing after the pandemic. But signs are emerging that we might have peaked. Business output now vs pre-pandemic Several companies reported revenue and earnings that show us at or above pre-pandemic levels. Take Proctor & Gamble (PG) for example. Revenues are slightly ahead of 2019. As noted on CNBC, a running gauge from Jefferies shows overall output is at 98.6% of its normal level before Covid. The biggest drags are air travel and leisure which haven’t fully recovered. That’s led to forecasts of 9.2% GDP growth in Q3 after our recent Q2 reading of 1.6%. Under normal conditions, that would be insane. In the current environment, it’s a comp against one of the lowest economic activity points in our history. And we’re starting to see signs of slowing growth as fiscal stimulus from the PPP and enhanced unemployment benefits fade. Housing takes a hit Two readings came out this week that suggests a slowdown in housing. First, the housing price index for May came in slightly below forecasts at a 1.7% vs 1.8% increase. Nothing too serious. Second, pending home sales dropped 1.9% compared to estimates of +0.3% month over month. That comes a week after new homes sales dropped 6.6% month over month compared to estimates of +3.5%. What’s also important to note is how inventory has started to creep up. At the current pace, it would take us only a few more months to get to 2019 levels. The good news is that would bring welcome relief to the ludicrous price increases we’ve seen. Plus, that would lend credence to the Fed’s transitory inflation arguments. Slowing inflation through greater supply is better for the economy. Slowing inflation due to a drop in demand isn’t good. That’s what happened in the early 80s as Fed chair Paul Volker jacked up interest rates to stave off inflation. It led to the deepest recession since the Great Depression. Headwinds aren’t priced in At the moment, markets assume a rosy outlook for the rest of this year and next. That ignores potential slowdowns from the delta variant. While nationwide lockdowns don’t appear to be on the horizon, ignoring the possibility opens investors up to risk. Several states have already begun to reinstitute mask mandates. International travel isn’t anywhere close to normal either. And yet, we’re pricing the markets as if everything is fixed this year AND we continue strong growth (or at least loose monetary policy). That seems a bit of a stretch. Our hot take Markets prove bears wrong more often than the other way around. However, prudence and risk management helps investors keep the money they earned. As the old adage goes - no one ever went broke taking profits. To ensure delivery of all emails, [whitelist us](. You are subscribed to email updates from [InvestingChannel](. To stop receiving these emails, you may [unsubscribe]( now. InvestingChannel, Inc., P.O. Box 118 New York, NY 10018. Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. 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