Bear Market Is Not Over

Quote of the Week

“We don’t develop courage by being happy every day. We develop it by surviving difficult times and challenging adversity.” – Barbara De Angelis

Technical Corner

So far this year as of this writing (10:05AM Wednesday January 18), the S&P 500 is up 3.2% YTD and the Nasdaq is up 6.1% YTD but the Bear Market is not over. As I stated in last week’s letter, all Bear Markets have Bear Market rallies. What I want you to think about is the data so don’t fall prey to “recency bias”.

Let’s take a look at some of the current data.

*Probably first and absolutely the most important is the coming fight in Congress over the debt ceiling being raised.

*The Savings Rate continues to sit at a multi-decade low.

*Credit Card Balance Growth is at multi-decade highs as of the latest data.

*The interest rate on that revolving credit accelerated to multi-decade highs as of the latest data.

*Real Income growth has now been negative for a record 21 consecutive months.

*Luxury Goods Consumption is negative -7.4% Y/Y while Luxury Homes Sales in now at -38% Y/Y. Wealth destruction for the wealthy is in overdrive and there is no return on all that capital they own as the balances of the populous retrenches.

* Yesterday the New York Fed Consumer Survey showed the Share of Households Reporting a Large Purchase fell to a 2-year low while Expected Growth in Spending fell to a 20-month low.

*The latest update to the Census Household Pulse Survey showed the ” Difficulty Paying for Usual Household Expenses” series is back up to cycle highs.

*Goldman Sachs, JP Morgan, Citi Group show declining earnings with Goldman Sachs down -70% Y/Y

*U.S. corporations are in a profit recession with profits down -6.4% so far this reporting period. Keep in mind that corporate earnings drive stock prices up or down.

*Auto loan delinquencies (60 days or more) are up +25%.

*Auto loan delinquencies for sub-prime borrowers is at 7.1% which is the highest since 2006. This is during a period when unemployment is at an all time low and incudes the Great Recession of

2008-2009.

*Consumption is cratering and it got a fresh confirmation across the goods economy this morning

with Retail Sales again printing a negative number and with steep negative revisions to the November report.

*Empire Manufacturing Survey is the worst since the Great Recession.

The above statistics are not consistent with a rising stock market and the rate of change of the above data is accelerating.

If you have friends or family in need of financial life planning services,

It would be the honor of Laurence Lof Financial Advisors to assist them.

We value your referrals!

These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Laurence Lof Financial Advisors, LLC are not affiliated. Laurence Lof Financial Advisors 4757 E Camp Lowell Drive Tucson AZ 85712 info@lofadvisors.com

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