Heads Up, Back in 1789, Marie Antoinette supposedly said, "Let them eat cake" as peasants starved in the streets of France. Fast forward to today, and it seems like Jerome Powell has picked up where she left off. Not more than a week ago, Powell historically slashed rates—claiming the economy’s fine. Meanwhile, Main Street is screaming the opposite. The U.S. Consumer Confidence Index just dropped to 98.7—its steepest plunge in three years. This is no small miss. Analysts expected it to be at 104.0, but here we are, at levels we haven’t seen since inflation soared above 9%. It’s not just the numbers that are down, either. People are feeling it—job cuts, fewer hours, payroll raises stalling. Consumers know something’s off. They’re starting to say it out loud. Yet, Wall Street? They don’t care. They’re acting like Powell’s rate cut has solved all the problems, sending the S&P 500 to all-time highs. The so-called "soft landing" everyone’s been praying for? They’re convinced it’s happened. But let’s take a second and pop the hood. When you look closer, there are signals that are flashing bright red—stuff that makes you go, “Hmm, that’s not normal.” For example, utility stocks. Take $XLU, an ETF that tracks utility companies in the S&P 500. It's up 24%, outperforming the entire index.
Let me tell you something about utilities—they’re defensive plays. When investors start piling into utilities, it’s not because they’re expecting the good times to keep rolling. It’s because they want to protect their cash. Now, if it was just utilities, maybe you could shrug it off. But let’s add Walmart to the mix. $WMT, the granddaddy of consumer staples, is up 54% YTD—outperforming even Amazon. Walmart is where people go when they’re feeling squeezed. That’s another defensive signal.
I’m not here to scream “CRASH!” from the rooftops. But when you see sectors like utilities and consumer staples outperforming tech and growth stocks, that’s a major red flag. Historically, the S&P 500’s inflation-adjusted returns since 1957 have averaged around 6.5% per year. Right now, we’re sitting at a 20% YTD return and up around 50% from the start of 2023. So, what’s next? Is there any more room for upside? Or are we about to see the air come rushing out of this frothy, one-sided market? Pay attention to those defensive stocks. They might be signaling that this market rally is more smoke than substance. Trade smart, Josh Belanger You’re currently a free subscriber. Upgrade for the full experience and receive exclusive special reports like "How to Get Rich in The Stock Market" and "Congress' Secret Stock Playbook: The Top 5 Power Picks Revealed”.
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Rabu, 25 September 2024
“Let Them Eat Cake”—Powell’s Latest Market Trick
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