Don’t look now, but gasoline prices are beginning to ratchet higher, and by the end of the year, our gas-price holiday could become a nightmare. (I am not saying that we’ll get all the way back to $3.70, but after trickling to $1.69; moving toward, three bucks will elicit a fair amount of outrage.)
Ironically, the bounce in gas won’t probably freak out retailers because they never got a bump in the first place.
Last month, retail sales declined -0.3% from February and only improved 1.7% from a year earlier. It is not the stuff of windfalls. Even more telling, the month-to-month decline in the following:
- Autos -2.1%
- Restaurants -0.8%
Yesterday, the consumer price index (CPI) was a goldilocks-like number that saw headline inflation increase by only 0.9%, but the core CPI soared 2.2%. While economists dismiss the so-called core because of the volatility of food and energy prices, no one can dismiss rapidly rising costs that are really holding back consumers (along with weak paychecks and pessimistic expectations).
Essential things we need to live everyday life, from medical care, shelter and car insurance, are going through the roof:
Medical Care
- Physicians +3.6%
- Hospitals +2.5%
- Prescription Drugs +3.6%
Shelter +3.2%
- Rent +3.7%
- Owner +3.1%
Motor Vehicle Insurance +5.1%
I have been very worried about rent-traps where people, particularly millennials, are trapped without the ability to save enough money and eventually own a home. The bottom line is whether those ivory tower economists want to acknowledge it or not, there is inflation and it’s in all the wrong places.
The Market
I have been impressed with blue chips leading the parade, but I think we might be seeing some profit taking with no place for that cash to go. Sure, the old FANG trade is picking up steam; overall, investors lack confidence to distribute buying beyond a few names.
Market Breadth |
NYSE |
NASD |
New Highs |
75 |
49 |
New Lows |
3 |
18 |
Advancers |
42% |
47% |
Decliners |
53% |
48% |
Make no mistake, big money smells big opportunities, and we are on the cusp of a massive upside move. This is the toughest part of the test- breaking, long-term trends of lower highs and key psychological resistance points.