Buzzwords of 2024 that will surprise stock investors

Economists, analysts, and commentators love inventing words and phrases to capture the economic zeitgeist. There was talk of a ‘vibe-cession’ in the US economy this year. It may sound harmless, but transferring vibes is not something to celebrate.

Of course, investors shouldn’t base their strategies on catchphrases. Whether it’s “temporary” inflation or the “Magnificent Seven,” jargon is useful in helping people understand the overall sentiment in financial markets.

With this in mind, let’s take a look at the vibe transfer phenomenon and consider its implications for today’s stock investors.

A tale of two economies

When renowned economist Paul Krugman warns that the United States is in the midst of a climate cession, you can be sure that this concept has taken root in the lexicon. Let’s start with the basics. What is vibe transfer and who coined the term?

Simply put, “mood” refers to the disconnect between optimistic economic data points and financial market behavior and the general malaise many Americans feel as they try to make ends meet. This is classic friction between Wall Street and Main Street, but at least now we have a catchy name.

The CNBC report appears to have credited the term to JPMorgan’s global research chair, Joyce Chang. A MarketWatch article, on the other hand, claimed that Bloomberg columnist Kyla Scanlon coined the term.

Regardless of who came up with the concept of a mood concession, it’s in conversation now and we should all stick to it in 2024. This succinctly sums up the current recessionary “vibe” being felt by the American middle class.

Although the United States hasn’t been officially in a recession since mid-2020, there’s no denying the daily financial struggles many people are experiencing. This is a story about two different economies. One is for those who have and the other is for those who have not.

Wall Street is clearly the domain of the rich, and large-cap stocks are doing well, with the Dow Jones Industrial Average (DJIA) posting its best May performance since 2020.

The S&P 500 (SPX) and Nasdaq (NDX) also performed well in May and are currently hovering near all-time highs. So, unless you just look at the large stock charts and go out into the real world, you might not understand why anyone is feeling the “vibes” of a recession right now.

All About Inflation

When commentators claim that all is well with the U.S. economy, they typically point out that the unemployment rate is below 4%. Of course, one can argue about the validity of Bureau of Labor Statistics (BLS) unemployment numbers, which tend to exclude people who work part-time, who have given up looking for work, and so on.

Then there is Gross Domestic Product (GDP), another commonly cited indicator of a country’s economic health. The Bureau of Economic Analysis recently revised down its forecast for U.S. GDP growth for the first quarter of 2024 from an already flat 1.6% to an even more anemic 1.3% year-over-year.

Nonetheless, there is always someone who calls the glass half full instead of half empty.

So while Nationwide Financial Markets Economist Oren Klachkin acknowledged that 1.3% GDP growth “looks discouraging,” he added, “It represents solid underlying momentum, as private domestic sales to domestic buyers, the core of the economy, have shown a healthy expansion of 2.5% on average per year.” “I don’t believe it,” he claimed. ”

In a similar vein, rather than acknowledging that the American working class is under ongoing financial pressure, one could simply say that American consumers are becoming “more cautious” and their incomes are “slumping.”

EY-Parthenon Chief Economist Gregory Daco wasn’t kidding when he described the U.S. savings rate in April as “low” in the X post above.

As MarketWatch’s Andrew Keshner points out, the 3.6% savings rate is “close to the rate seen in the early stages of the so-called Great Recession of 2007-2009.”

But the most important criterion for average Joe and Jane is consumer price.

i am definitely ~ no See Core Personal Consumption Expenditures (PCE) Index. Although this may be the Fed’s preferred measure of inflation, it excludes food and energy prices, which are so important to the “mood” of America’s middle class.

For large-cap investors, assessing this “vibe” is essential in determining how much capital to allocate to risky assets. Sooner or later, the inconvenient truth of Main Street will be reflected in stock prices.

Use your eyes and go with your intuition

The best response is not obsessing over the University of Michigan’s Consumer Sentiment Index or analyzing various inflation statistics in spreadsheets. Rather, investors should consider personal experience and other anecdotal evidence that economists and statisticians tend to be quick to ignore.

If you feel the so-called “vibe” in your salary and purchasing power, it is not just a mood. These are as real as official figures from experts, and you have every right to allocate and diversify your portfolio holdings accordingly.