Dear New World Investor: NOTICE: No newsletter next week, as unlike days of yore nothing much happens during Thanksgiving week. The day after Thanksgiving used to be a major tell for the next market move – now it’s a nothingburger. I’ll be back on December 5, more than ready for the Santa Claus rally. In the near term, I expect inflation to continue to slowly fall – in large part because I still think a brief, shallow recession is coming. But two years from now I think inflation will be higher as Trump tries to undo many of the policies...

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Dear New World Investor: The October Consumer Price Index (CPI) headline number increased 2.6%, right on the consensus but a bit faster than September’s 2.4%. The month-over-month increase was 0.2%, the same as the last three months and also right on the consensus. As usual, a few outliers warped the numbers. Auto insurance is still much higher than a year ago while gasoline – which is not in the core inflation calculation – is much lower. Click for larger graphic h/t Yahoo Finance The core CPI excluding food and energy was up 3.3% year-over-year and, for the third month in...

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Dear New World Investor: The August payrolls report showed 142,000 nonfarm payroll jobs added, fewer than the 165,000 expected by economists. July was revised down from +116,000 to +89,000. But the unemployment rate fell from 4.3% in July to 4.2% in August, the first decrease in the unemployment rate since March. Traders pretended a 0.1% difference for one month would make a big difference to the Fed, which is obvious nonsense. Wednesday morning’s initial market reaction to the August Consumer Price Index (CPI) – down 88 points on the S&P 500 – was not about the numbers, the numbers vs....

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Dear New World Investor: This morning’s first revision of the June quarter real GDP report raised the annual growth rate from 2.8% to a healthy 3.0%. That’s more than double the sluggish 1.4% growth rate in the March quarter. Click for larger graphic h/t Yahoo Finance Consumer spending, which accounts for about 70% of U.S. economic activity, rose at a 2.9% annual rate last quarter, up from 2.3% in the initial estimate. Business investment expanded at a 7.5% rate, led by a 10.8% jump in investment in equipment. The Federal Reserve’s favorite inflation measure, the Personal Consumption Expenditures Index (PCE),...

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Dear New World Investor: This morning’s first estimate of June quarter real GDP growth surprised me by coming in at 2.8%, pretty much right on the Atlanta Fed’s GDPNow model estimate I reported last week at +2.7%. I wrote: “The Atlanta Fed’s GDPNow model forecast for June quarter real GDP growth rose to +2.7%, well above the Blue Chip economists’ forecast. I don’t see how it could be that strong, but we’ll find out next Thursday morning.” Click for larger graphic h/t Yahoo Finance Well, I was wrong and the consensus for +2.0% was really wrong. March quarter GDP was...

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Dear New World Investor: A major PC crash slowed and shortened this issue. No fractal, GDPNow, or bitcoin graphics. My apologies for that – the little laptop did its best and we’ll be good to go next week. Yesterday’s core Consumer Price Index (CPI) report for May showed a month-over-month increase of just 0.2%, a tick below the 0.3% expected as well as April’s 0.3%. The Fed now expects only one quarter-point (25 basis points) reduction in the Fed funds rate this year. They now expect four cuts in 2025 instead of three, so not much really changed. As always,...

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I was planning to issue a Buy recommendation on Palantir (PLTR) in this Thursday’s letter, but after the company reported a great quarter today Wall Street is clobbering the stock in the aftermarket. That’s dumb, and I want you to take advantage of them. I’ll have the basic write-up on Thursday. PLTR is an outstanding Big Tech dominator of AI software. I recommended PLTR in Boomberg on October 28, 2022 at $8.64 Their business has improved so rapidly that it’s still cheap. Here is this week’s Boomberg write-up: Palantir (PLTR) reported a good March quarter, raised guidance for the year,...

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Dear New World Investor: Although tomorrow is a stock market holiday, we are supposed to get the February Personal Consumption Index inflation. Core PCE is estimated at over 3%, which will keep the Fed in “High – but not higher – for longer” mode. Click for larger graphic h/t @Mayhem4Markets Next Friday, April 5, we see March payrolls. There is a simple rule to predict the beginning of a recession: A 10% rise in unemployed people. Click for larger graphic h/t @MichaelKantro To get there, we need to see services weaken. According to the St. Louis Fed, over the past...

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Dear New World Investor: The Fed met and said the economy is much stronger than they expected but they still expect three quarter-point reductions in the Fed funds rate this year. I think they’re wrong on both counts. You could obsess over the gory details or you could just look at all you need to know: Wednesday’s daily price action. Click for larger graphic It’s hard to find undervalued stocks in this market, but I’ve found one that can pull off a turnaround. Yeah, yeah, I know the old joke: “When management says it’s a turnaround, they are about to...

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Dear New World Investor: There’s now $8 trillion in money market funds and CDs. Most of that will stay in some form of fixed income, but some has been waiting for a market drop to buy stocks. Friday’s record S&P 500 close should get some of the sideline money throwing in the towel and buying stocks. Historically, after an all-time high the S&P 500 has outperformed its long-term average one-, three-, six-, and 12-months later. The one-month returns are not quite as strong, suggesting a short-term overbought condition in some cases. One year later, the S&P 500 has risen 13...

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