The bull market in U.S. stocks needs a dose of bad economic news to continue pushing higher, according to Marko Papic, chief strategist at the Clocktower Group. Stocks notched down on Monday, after Friday saw the S&P 500
SPX
and Nasdaq Composite
COMP
rise deeper into record territory. But for the bull-market run to continue, equities need weaker U.S. economic data, Papic said in a Monday client note.
“The simple way to boil down our view is that we remain firmly in the ‘bad news is good news’ camp,” he wrote. “A slowdown is precisely what the doctor ordered.” Weaker economic data would justify the Federal Reserve’s “pivot” signal from December, which would bring down longer-term borrowing costs and help reduce real interest rates, he said. Read: Fed has the luxury of making policy without pressure of urgency, Bostic says Without rate cuts, Papic said that higher borrowing costs, a credit pinch and the declining cash hoard from the pandemic era’s fiscal stimulus should eventually put a dent in consumer spending. As a counterweight, he pointed to relatively low household debt-to-income ratios from a historical perspective, and a Fed that has a lot of room to lower its policy rate from the current 5.25% to 5.5% range, a 22-year high.
U.S. households still have low debt-to-disposable-income levels from a historical perspective.
M …
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SPX
and Nasdaq Composite
COMP
rise deeper into record territory. But for the bull-market run to continue, equities need weaker U.S. economic data, Papic said in a Monday client note.
“The simple way to boil down our view is that we remain firmly in the ‘bad news is good news’ camp,” he wrote. “A slowdown is precisely what the doctor ordered.” Weaker economic data would justify the Federal Reserve’s “pivot” signal from December, which would bring down longer-term borrowing costs and help reduce real interest rates, he said. Read: Fed has the luxury of making policy without pressure of urgency, Bostic says Without rate cuts, Papic said that higher borrowing costs, a credit pinch and the declining cash hoard from the pandemic era’s fiscal stimulus should eventually put a dent in consumer spending. As a counterweight, he pointed to relatively low household debt-to-income ratios from a historical perspective, and a Fed that has a lot of room to lower its policy rate from the current 5.25% to 5.5% range, a 22-year high.
U.S. households still have low debt-to-disposable-income levels from a historical perspective.
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