Wednesday, November 1

Lower consumer confidence points to slowing economy

The US Consumer Confidence report released yesterday shows the index in Oct at 105.4, lower than the expected 108.0. With the anticipation of a slowing economy, the US treasury rose from 100 18/32 to 102 5/32 within a week (yields dropping from 4.80% to 4.60%).

Next important data to watch: Oct non-farm payrolls to be released on Friday, expected to be +125K. Note that the Sep number was surprisingly low (51K) -- if the Oct number remains under 100K it would be a clearer sign of an economic slowdown.

In general, the recent data from the US mostly point to a softening of the economy. What does it say? It means it's time to think about defensive stocks. A good example would be Citigroup (ticker: C) trading at 10-11x P/E. We can probably wait after the Christmas Rally to do the switching.

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