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QUOTE OF THE WEEK

“Success is not final, failure is not fatal.  It is the courage to continue that counts.” – Unknown

TECH CORNER

This year started off with a major miss to the downside from the Durable Goods Orders Index. Durable goods are defined as purchases of items that last a long time vs consumer items that are consumed in the short term such a groceries, restaurants, etc. Durable goods consist of items that you plan to keep for the long term such as automobiles, washing machines, televisions, and even airplanes.   

New orders for durable goods declined -6.1% in January (-6.3% including revisions to prior months). Orders excluding transportation declined -0.3% (-0.9% including revisions), versus a consensus expected +0.2%. The largest decline came for orders of commercial aircraft, while motor vehicles and parts fell a more modest -0.4%. To add insult to injury, December orders ex-transportation was revised down from a +0.5% to a 0.1% decline.

As a side note, retail sales have declined in three of the past four months. Manufacturing production, excluding the auto sector, has declined in three of the past four months and durable goods are following suit by also being down in three of the last four months.

A number of factors are likely to keep the path forward rocky as we move through 2024. Two of those factors are restrictive monetary policy from the Federal Reserve and the tightening of lending standards following the stress in the banking sector.

What does this mean for the probability of a recession going forward?  Combining Housing and Durable Goods is an indicator of a possible recession so in looking at the graph below, you will see that every time housing and durable goods have declined, a recession has followed. Anything can happen but it would take a major shift in Fed policy of lowering interest rates significantly and quickly, plus, a change from monetary tightening to monetary easing which may not even work due the lag effect of the Fed’s current policy.

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

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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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