US economic reports missing expectations
According to David Rosenberg, the chief economist of Gluskin Sheff, 14 economic reports in August thus far have missed expectations. On the other hand, five have beaten consensus estimates, and three were in line with expectations. Among those that have missed the expectations are home sales and Markit PMI (purchasing managers’ index). Rosenberg said in a tweet, “Here we have nearly 3 misses for every beat, and yet the bullish chatter on the economy shows no signs of abating. Welcome to the Flat Earth Society.”
A word of caution
Previously, Rosenberg had blamed “artificial support” from central banks as the reason for the record stock market run, according to CNBC. He believes that we are in a very late cycle and suggests exercising caution as the economy slows down.
Economic surprise indices
Moreover, many market participants have now started talking about the initial signs of a turning point in the economic cycle for the US (SPY) (IVV) and the Eurozone (HEDJ). The Citi economic surprise index was negative for the US for the first time since the first quarter. This index measures economic data surprises relative to forecasts. While the US index has slowed, the Eurozone index has climbed steadily since mid-June. This narrowing gap could also mean support for the euro, while the US dollar (UUP) weakens.
If the recent economic reports mark the beginning of a trend, gold prices (IAU) (GLD) could be in for a treat. As economic growth slows down and the dollar comes under pressure, gold and gold stocks (GDX) (GDXJ) could be among the first to benefit.