Fears of a recession have been hanging over Wall Street lately. This isn’t surprising, given that almost everyone else is in a recession, led by China.
The world’s most populous nation has declining imports and exports, so much of the rest of the world continues to follow the example of Foxconn – one of Apple Inc.’s (AAPL) largest suppliers – and move their supply chains to India, Vietnam and other countries in Southeast Asia.
As I mentioned on Tuesday, over in Europe, a recession is now official as France, Germany and Ireland are in the midst of a contraction. The eurozone’s Purchasing Managers Index (PMI) in June declined to 50.3, which is a sharp deceleration from 52.8 in May and substantially below economists’ consensus estimate of 52.5. (Any PMI reading below 50 signals a contraction.)
Given this, Wall Street was shocked when overwhelmingly positive U.S. economic data started rolling in on Tuesday. I’ll admit, never in my wildest imagination could I expect economic data this strong.
So, in today’s Market 360, first we’ll review the shocking economic reports.
And then, I’ll share how to find out where you should invest now.
No Wonder Recession Fears Are Down
Latest Housing Data
The Commerce Department announced that new-home sales surged 12.2% in May. Economists were expecting a 0.5% increase. New-home sales are now 20% higher than they were a year ago. The median new-house price declined 7.6% in May to $416,300.
This comes on the heels of last week’s strong housing starts report. Housing starts rose 21.7% to a 1.63 million annual pace in May – the largest increase since 2016. Analysts had projected housing starts would decline 0.1% to a 1.40 million annual pace.
I should add that home builder confidence is rising. According to the National Association of Home Builders (NAHB), the NAHB/Wells Fargo Housing Market Index increased in June for its sixth-consecutive month.
Robert Dietz, the chief economist at the NAHB, commented:
A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year… The Federal Reserve nearing the end of its tightening cycle is also good news for future market conditions in terms of mortgage rates and the cost of financing for builder and developer loans.
The Consumer Confidence Index
Meanwhile, the Conference Board revealed that its consumer confidence index jumped to 109.7 in June, up from 102.5 in May. This marks the highest reading since last January.
Personally, I like this audit better than the University of Michigan survey in June, which noted that the consumer sentiment index rose to 63.9, up from 59.2 in May. Economists had anticipated a June reading of 60.2. This sets the United States up for a very strong June retail sales report, because consumers are clearly happy.
Durable Goods Orders
Now, the biggest surprising economic news was that durable goods orders rose 1.7% in May. That means it’s been up for three-straight months. Economists had expected a decline of 0.9%.
Economists might have been pessimistic because defense orders did plunge 35% in May. But there was a 33% surge in passenger plane orders to offset that big drop in defense.
Further, when we dig into the details, everything is encouraging. For example, excluding transportation, new orders increased 0.6%. Excluding defense, new orders were up 3%.
Clearly, the economists’ projections couldn’t even hit the broad side of the barn!
Where Should We Invest Now?
The latest bout of positive economic data should help ease recession fears. My favorite economist, Ed Yardeni, has even changed his tone and is now calling the current environment a “rolling recovery” instead of a “rolling recession.”
Now, as investors, we must ask ourselves: Where should we invest now?
That’s the question I’ll answer in Friday’s Growth Investor Monthly Issue for June. I’ll also share my latest Top Stocks lists, as well as I why I expect my Growth Investor stocks to increasingly break out as market leaders.
(If you are already a Growth Investor subscriber, you can log in here.)
Sincerely,
Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Microsoft Corp. (MSFT) and Amazon.com, Inc. (AAPL)
