Economy Weaker – Inflation Should Cool – Harris’ Debate

Today is 9-11. With the presidential debate last night and inflation today, I fear that remembrance will be downplayed today. That’s sad and disappointing. One of my childhood and high school friends along with a fraternity brother were murdered that day. Most of us know someone who was killed or knows someone who knows someone who was killed. On behalf of our clients Heritage Capital continues to support the great work done by The Tunnels to Towers organization.

Never Forget…

Last Friday we learned that the economy created less jobs than expected and downward revisions from previous months continued on the heels of the government revising older months lower by almost one million jobs. No. I don’t think this is some conspiracy. And I don’t think it has anything to do with the election. This is business as usual for the Bureau of Labor Statistics. In short, the jobs market which had been the single strongest part of the economy has weakened significantly.

However, and these are big ones, wage growth increased and average hours worked increased. If you run a company and you’re worried about demand declining, you’re certainly not going to pay workers more money and increase the number of hours they work. Recession may be coming (because the next one always is), but it doesn’t seem to be clear and present danger.

Today, the Consumer Price Index (CPI) will be released and it looks like it should come in as expected or even a little cooler. I know I am cherry picking one single input, but energy prices as referenced by crude oil below are anything but strong. They look awful. While that certainly helps inflation, it is also worrisome from an economic growth perspective. Please remember that this is just one single indicator. Crude has collapsed plenty of times without an accompanying recession.

Markets continue to bounce back from last Friday’s drubbing. I still do not believe Friday’s lowest levels will hold over the coming 4-5 weeks. But, as you know, I am okay being wrong. I am not okay staying wrong. I fully anticipate being more active than normal this and next month. Defensive sectors like staples, healthcare, utilities and REITs are the leaders. If they cede to tech, discretionary and/or financials, I will revisit my position.

Finally, lots of folks asked me about the importance of the debate. As I have mentioned countless times this year, the election doesn’t really matter in the markets nor the economy until at least Halloween, if at all. I did not watch the debate last night. I was still in Florida meeting with clients, a much better use of my time. I did tune into FOX and MSNBC for post-debate analysis. While the pundits declared VP Harris the winner, I didn’t see anything in the sound bites that was shockingly new regarding economic policy. By the time this goes out, I will hopefully be at 38,000 feet on Avelo Airlines heading back to Tweed airport in New Haven.

On Tuesday we bought XRT, RYRIX, IWP, GDX, NUGT, SSO, EWM, EPI, RYBHX and more levered NDX. We sold EWT, EZA and some RYAVX.