Few Signs of Intelligent Life

The Credit Strategist Blog

Signs of intelligent life are increasingly rare in this world.

While the stock market may be waking up to the fact that interest rate hikes are slowing down the economy, investors are desperate to see stocks rise. The thought of further losses is unbearable to them as well as their Wall Street and media enablers. But the facts on Planet Earth are conspiring to make life very difficult for them.

December retail spending fell from the prior month by a seasonally adjusted -1.1%, the sharpest pace in 2022 according to the Commerce Department. November sales were also revised lower and retail sales have now fallen for three of the last four months. Other signs of consumer weakness include record high credit card balances and higher loss reserves at major banks, which are now adding to their reserves at the highest rates in years. Today, Discover Financial Services more than doubled its charge-off forecast to 3.9% for 2023. Business sentiment is deteriorating as recognition grows of the lagged effects of interest rate increases on the economy (in this case, some of the most aggressive hikes in history).