CHARTS OF THE WEEK: The Real-Time Indicator That Says The Consumer Is Already Rolling Over

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  • Why Scott Brown Is The Master Of This Market
  • Why You Still Don’t Have A Job
  • As Europe Crumbled, Investors Quietly Tip-Toed Back Into U.S. Stocks
  • The Real-Time Indicator That Says The Consumer Is Already Rolling Over
  •  Detroit’s Amazing V-Shaped Recovery

Why Scott Brown Is The Master Of This Market

The market tanked after Scott Brown's election in mid-January.

Despite the predictions of Cramer and his ilk, the market did not want gridlock, what it wanted was spending. In this stimulus-fuelled market, gridlock was not an exciting prospect.

But it soon became clear that Brown was not the tea party obstructionist his critics made him out to be, and in late February he announced his support for a Democratic jobs bill. Since then, it's been a straight up-line for the market.

No more gridlock! Spending! Profit!

Why You Still Don't Have A Job

The latest DiscoverCard small business sentiment numbers came out today, and showed that confidence actually dipped in February from January.

That's one reason you don't have a job yet

Here's another nugget from the report: the number of businesses with cash-flow issues is still elevated. Yes, it's improved a little bit, but at any other time, we're looking at unprecedented heights.

If we put together a few more months of improvement, then we might really see some job creation again.

As Europe Crumbled, Investors Quietly Tip-Toed Back Into U.S. Stocks

According to the most recent fund flow data from The Investment Company Institute (ICI), U.S. mutual fund investors came back to U.S. stocks in late February as the Eurozone was rocked with uncertainty.

While fund flows were only mildly positive in mid-January and most recently late February, as shown below, keep in mind that a massive $39 billion flowed out of U.S. stocks in 2009 according to ICI (not shown). That's why the green tip-toes below are significant.

The average U.S. investor still remains highly sceptical of U.S. stocks, given the huge 2009 outflows that have yet to return... but... Europe's travails or the prospect of a sustained U.S. recovery may have rekindled some faith in domestic equities, given that this is the second time in recent weeks that money has flowed into U.S. stocks.

This could be the beginning of a period where we see a portion of 2009's outflows come back to U.S. stocks.

The Real-Time Indicator That Says The Consumer Is Already Rolling Over

Consumer Metrics Institute constructs a U.S. consumption index based on actual transactions data for a range of major discretionary purchases such as cars, houses, durable goods, and vacations.

The advantage of the institute's method is that consumer transactions data might be able to indicate the direction of the economy before U.S. GDP data is officially released.

As shown below, their 'Daily Growth Index' has lead changes in U.S. GDP reasonably well, at least going back to 2006. Admittedly, this is a short time frame.

Yet if their transactions data is a dependable leading indicator, then we could be in for a tumble.

That's because their Daily Growth Index just crashed, which means that U.S. GDP growth could be about to slump as well. Still, keep in mind that many economists expect about 3% U.S. GDP growth in 2010, so it wouldn't be a huge surprise if U.S. GDP growth slumped a little bit in the coming quarters.

Detroit's Amazing V-Shaped Recovery

Remember when it looked like the US auto industry was dead?

Yeah, that didn't happen. As today's chart, drawn from the consumer spending data (via Waverly Advisors) shows, Detroit is clearly experiencing a 'V'.

Foreign cars? Well there was a V up until recently, but then the blue line pulled sharply back. Thanks Toyota!

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