RE:Making Sense out of NonsenseSooooo....let's take a deeper dive into "what's under the hood?"
1....The S&P 500 is not really an index where the components have a fixed weight. It is market weighted based on the market cap of the companies in it. So if the bigger companies make a big move one way or the other it has a much bigger effect than a similar move by a smaller company. The top 10 largest companies in the S&P 500 have a combined weight of just over 30% at current prices!! Who are these companies? They are primarily tech companies involved in AI and AI right now is a darling of the stock market. So IMO this covers up the underlying problem in the economy and the index is giving a false signal.
2....Bankruptcies in the US are at a 13 year high. If you just look at the S&P you wouldn't think that things were that bad.
3....I mentioned in the earlier post that consumer credit card debt was at an all-time high. So how bad is it? Well at the end of Q1, credit card debt in the US was just under 1 TRILLION (about 5% of GDP!!). What's worse is that credit card debt usually falls in the first quarter. This year it didn't. This is first time that has happened since this stat started being tracked in 2000!! Since 2000 credit card debt has doubled. All of this suggests that consumer which make up 60-70& of the economy are keeping things moving through the use of debt as opposed to a growth in real income. The US Government is doing the same with a projected budgetary deficit of 1.5 TRILLION this year and according to the CBO, this figure will almost double to 2.9 TRILLION in 10 years.
As a friend of mine quipped the other day, "The economy is like a house made of playing cards and they are trying to build a third story without a foundation". My response? "True but to me it's more like the house that first two of the three little pigs built and the big bad wolf is lurking nearby". Either way it won't take much for whole thing to collapse.
That is my rant for the day...take it or leave it....up to you...