Although most people tend to take it easy this week, I’ve always found this to be the best time of the year to grind out work.
Primarily because there are way fewer distractions… no client calls… no meetings… softer deadlines.
Just me, alone with my thoughts and a huge amount of data… uninterrupted.
And while normally, our first piece of the week gives you a quick glimpse ahead of the remaining four days… I thought we’d look past that and into our 2022 economic outlook.
This year, I’m putting the finishing touches on my new Hyper Frequency U.S. Economic Data Tracker. And I can already tell it’s going to pay huge dividends.
The models I built years ago to project inflationary pressures — Purchasing Managers Index, Producer Price Index and Consumer Price Index — and gross domestic product components such as retail sales and payroll data have proven decent.
After all, there’s a reason we’ve been so vocal about buying recent dips… The data has shown us we weren’t done growing yet.
But I’ve never had a tool with everything all in one place, organized into components before.
And now that I do, trends that took a fair amount of work to spot before are jumping out immediately.
My 2022 Economic Outlook
What popped upon completion Monday was that the economy clearly headed into a slowdown that will manifest sometime in the first half of 2022.
In the same way I knew that the economy was going to slow down in Q3 2021…
In the same way I knew that low inventories of coal and natural gas could cause an energy crisis all the way back in July…
In the same way I knew to keep reiterating to buy dips, because markets were going back to all-time highs…
I know that 2022 is going to be a heck of a lot harder to be profitable.
How do I know?
Monday’s holiday retail sales data release from MasterCard was massive…
So much spending was pulled forward into the holiday season — presumably as a result of over-ordering due to supply chain worries — that these annual comparisons look cartoonish.
Total retail up 8.5%… e-commerce up 11% — a staggering 64.1% versus 2019.
And the biggest benefactors were apparel and jewelry retailers, with sales up 47% and 32%, respectively, over last year’s pandemic low.
Society is DONE with cowering in our homes, waiting on this pandemic to end. Instead, we’re being society again… Folks will get dressed up and go to their holiday parties, gosh darn it!
The country is over 70% vaccinated with at least a first dose — including children. And in comparison to the first few waves, this is what society has thought of the omicron variant.
If you’re on Twitter, give that RTB guy a follow, by the way… The dude spits straight fire, and is a fantastic analyst to boot.
But now let’s move one step further down the rabbit hole of our 2022 economic outlook.
If retail sales are rocking now, what happens after the New Year?
Source: Back to the Future, Yahoo!
Q1 is notoriously slow for retailers, who almost universally have sales clumped into two huge quarters (Q2 and Q4) which are immediately followed by two awful quarters (Q1 and Q3).
How long it will take for the market to realize this is hard to say…
But we’ve already seen a slowdown in personal consumption expenditures this year following the elimination of pandemic benefits.
Source: Fortune Research
And with the post-delta variant, pre-holiday reacceleration in spending now squarely in the rearview mirror, there’s only one direction for things to go from that peak…
All the best,