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Mountain of Worry

By Charles Payne, CEO & Principal Analyst

While there is increased talk of economic stagflation, the stock market remains bogged down in a trading range that sees staircase rallies and elevator shaft falls.

The assortment of things have derailed the rally range from the nonsensical to the sublime. The political theater has derailed big up-sessions, but so too have more substantive concerns:

  • Dollar
  • Yields
  • Inflation
  • Recession
  • Stagflation

Yes, stagflation is the most recent reason for selling stocks. It’s not just in the United States; there is a growing concern about high unemployment being offset by higher inflation. The stagflation argument gained steam from the first quarter Gross Domestic Product (GDP) report and the surge in commodities prices.


However, 2.3% beats consensus, which is the first time that’s happened in the first quarter of any year since 2008. The number is well above average (1.6%) of the GDP from 2009 – 2017. 

Key Metrics

  • Personal Income: +$182.1 billion
  • Personal taxes: -$40.1 billion
  • Disposable Income: $222.1 billion
  • Savings rate: 3.1% from 2.6%

Negative Surprise

  • Personal Consumption: +1.1%

Positive Surprises

Business Investments: +7.3%

  • Structures: +12.3%
  • Equipment: +4.7%


  • Imports: +4.8%
  • Exports: +2.6%

Commodities Price Moves 2018

  • Cocoa: +49.7%
  • Lumber: +27.3%
  • Wheat: +16.4%
  • Oil: +14.3%
  • Nickel: +12.1%
  • Corn: +11.4%
  • Soybean: +10.8%
  • Aluminum: +6.2%
  • Gold: +2.1%
  • Copper -7.2%

I’m not in the stagflation camp yet, but I will continue to monitor.

I think the biggest worry for investors is this need for a daily dose of impending doom. In life, when people and crowds look for something even when it’s not there, they eventually find it, but more often than not, they create it themselves. The noise has drowned out all the great news this year. Even when there has been notable progress, the reactions have been harsh.

What’s interesting is the stock market has a reputation of “climbing a wall of worry,” but it’s tumbling on all breaking news and emerging conventional wisdom.

Nonetheless, I will say that the bears are frustrated that the market hasn’t completely collapsed. This is easily illustrated with the pennant formation of the market, as there have been higher lows and lower highs, which means there should be a moment of truth soon where a decisive move occurs.

S&P 500

  • Key Resistance Points: 2,717 then 2,786
  • Key Support Points: 2,634 then 2,581

This calls to mind the notion that stocks have been priced for perfection, which I don’t think has been the case, or perhaps the economy has reached perfection and it’s only downhill from here.

Is this as good as it gets?


What is "As Good As It Gets?"

1- A single mother and waitress, a misanthropic author, and a gay artist form an unlikely friendship after the artist is assaulted in a robbery.

2- Conventional Wisdom that continues to derail stock market rallies (see Michigan Sentiment Report)

Investors began last week with the “high watermark” comments, derailing a rally attempt after extrapolating the comments from the CFO of Caterpillar to reflect the entire economy and the market situation. 

The Michigan Consumer Sentiment release reveals a massive tug of war between optimism over tax reform and pessimism over potential tariff and trade war.

Consequently, while the revised April report edged higher, current conditions slipped. The 2018 average of 98.9 is the second highest in the past 70 years (107.6 in 2000).

Michigan Consumer Sentiment
April Revised


















Where Do We Go From Here?

However, I say the best is yet to come. Moreover, there are many intriguing positives on the horizon, including peace on the Korean peninsula and new trade deals.

Before then, the market will grapple with a hard push by the Trump administration on tariffs with a lot of news expected this week.  We also get more earnings reports, the Federal Open Market Committee (FOMC) gathering, and the jobs report, too.



Charles Payne
Wall Street Strategies


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