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After completing one of the best quarters since 2009, just about everybody on the street is talking about the economy moderating. There is a consensus that revenues will flatten and that we will enter into a slower corporate-profit growth. This expectation in itself is bullish.
Then, of course, there is the yield curve which inverted slightly two weeks ago and has triggered expectations for a recession.
As I have discussed several times in the past, the inversion would have to persist for 2 to 3 months to signal a recession. If this were to occur, a recession would not begin for at least 12 to 18 months.
The economic releases this week will be focused primarily on the employment situation on Friday which is expected to show an increase of 170,000 new jobs and the unemployment rate to remain unchanged at 3.8%.
I continue to believe that manufacturing will be very impactful on market sentiment. On Monday, we will see Retail Sales, PMI Manufacturing, Business Inventories, ISM Manufacturing Index and Construction Spending. On Tuesday, Durable Goods. Wednesday, PMI Services Index and ISM Nonmanufacturing Index. Thursday, Jobless Claims and Friday Unemployment and Consumer Credit.