After last week’s dismal Q2 GDP and retroactive lowering of previous periods, we have received another couple of slugs of bad data early this week: yesterday’s big miss in the ISM index, which came in just above contraction at 50.9, and today’s negative growth in personal spending.
Any of these by itself is not catastrophic but, taken together, they really begin to paint a picture of an economy that is running out of steam. Now we have an impending deficit deal which amounts to negative stimulus at the end of the day, and it’s time to start wondering again whence the aggregate demand is going to come.
Yes, my friends, the deflationary winds are whipping up again. This doesn’t bode well for growth stocks or commodities. High grade bonds, blue chip dividend stocks, and selected foreign markets are looking like the better bets in this macro environment. And of course, if all else fails, there is that often hated but ever useful asset: cash.