QI TAKEAWAY — Upside economic surprises brought euphoric responses to the stock market in yesterday’s trading session but failed to move the needle on 2023 terminal Fed funds expectations. Declining income expectations and vacation plans leave us unconvinced amidst the steady drumbeat of insolvencies and layoffs. Ride the default rate cycle in households and corporate credit.
- Conference Board’s expectations index rose 10.9% MoM in June, the highest since August but a technical bounce due to the debt ceiling resolution; however, Jobs Hard to Get vacillated to 12.4 vs. last month’s 12.6 while 69.3% of consumers anticipate recession
- The spread between consumers expecting their incomes to rise versus fall fell to 5.0% in June vs. the 7.5% seen in May, which was a 2-year high; meanwhile, Vacations Intended in the next 6 months also decreased, continuing a downward trend which began last December
- While core capex New Orders rose to a 4.0% 6-month annualized gain in May, Shipments stayed put at their 2.5-year low of 1.5%; with leading Backlogs contracting on a 6-month annualized basis for a fourth month, it is premature to call the bottom in the capex cycle