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Welcome to the Idiocracy

At 2:30 pm ET today, the Rodney Dangerfield of finance - Fed Chair Jerome Powell - steps to the mic.

Forget more interest rate cuts (not coming anytime soon!). The world wants to know whether he’s freaking out about tariffs, too.

After all, since Adam Smith penned The Wealth of Nations in 1776, everyone knows tariffs immediately cause recessions, right?

Not so fast!

Not only is the father of free markets in favor of tariffs in four instances (run down that rabbit trail here), but there’s no such immediate connection, despite what the headlines for the past two weeks would like us to believe.

Back in June 2023, I penned an op-ed for Newsweek, proclaiming “No, We're Not Heading to a Recession, Despite What the Pundits Want You to Believe.” And there’s (still) nothing to fear.

Don’t simply take my word for it, though. Take it from the most connected insiders. Literally.

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Give Me the Leaders, Not the Laggards

Ignore the blowhards proclaiming that the latest consumer sentiment reading guarantees a recession.

Sure it plunged 16.1% since December - the steepest decline since the pandemic began. But it’s a lagging, not leading indicator.

Take a look:

In other words, consumers typically feel the pain after the economic gut punch, not before.

Funny thing about feelings, too. Sometimes they’re just feelings with no basis in reality.

As you can see in the volatility of the sentiment chart above, many times consumers feel terrible and there’s no recession afoot.

Welcome to the current situation!

I say that because another group of humans possess hard data that gives them an uncanny ability to predict impending doom. And they don’t seem perturbed one bit.

Case in point: executives of S&P 500 companies can’t stop talking about tariffs right now. We’re witnessing the highest rate of “tariff talk” in over a decade (see here). However, there’s barely a whisper about a recession. Only 13 mentions last quarter.

Per FactSet:

Even more telling, not a single executive in the Consumer Discretionary sector mentioned a recession. We’re talking about companies like $HD ( ▼ 0.19% ) , $SBUX ( ▲ 0.11% ) , $AMZN ( ▼ 0.68% ) , $TJX ( ▲ 0.45% ) , and $NKE ( ▼ 0.54% ) .

Marinate on that one for a moment.

Of all the sectors, this is the one that could sniff out an imminent and protracted breakdown in consumer spending and in turn, the U.S. economy. But they’re not concerned. So we shouldn’t be either.

Now, I’m not saying all is well with the consumer’s soul and wallet. What I am saying is this – no matter how much talk you hear about an impending recession, there’s not one even remotely in sight.

I’ll share more data to prove it during tomorrow’s The Big Money Show. Here’s what matters for today…

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The Big Skinny...

Tune into Powell’s speech. Just don’t punt your stocks. Even if he mentions the word recession.

Why? Because the economy is not the stock market.

While tariffs might create a growth scare in the near term, we’re not on a crash course with a nasty recession. And neither is your portfolio.

Not with tax cuts and bureaucracy cuts promising to boost personal and corporate profits in the back half of the year.

Don’t stop believin’…

– Lou