INSUBCONTINENT EXCLUSIVE:
Over the past five years, US equities have defied gravity, powering through a pandemic, supply chain chaos, and a historic tightening cycle
Wall Street cheered, tech stocks soared, and valuations reached levels unseen since the dot-com era
For many, the rally became self-fulfilling: every dip was bought, every correction shallow.But now, the tide seems to be turning.Beneath the
surface of buoyant indices, a very different story is unfolding
Economic momentum is stalling, inflation expectations are resurfacing, and the once-reliable American consumer is showing signs of fatigue
and among the biggest in two years.That speaks volumes
In a market where cash typically chases momentum, these outflows reflect growing caution among investors, even as the broader indices still
hover near record highs.Adding to this shift is Warren Buffett himself
over the past 10 quarters
compares the total value of the stock market to the size of the economy
Shiller P/E Ratio (CAPE Ratio): This valuation metric smooths out earnings over 10 years to account for economic cycles, offering a
long-term view of whether the market is cheap or expensive
These levels were last seen during the height of the dot-com bubble, with sobering consequences thereafter.The takeaway? Market signals are
pointing to a dangerous disconnect between soaring valuations and underlying fundamentals.2
GDP slips into the red as consumer spending loses steamThe U.S
Much of the weakness came from a surge in imports, as businesses rushed to build inventories before new tariffs kicked in, temporarily
tilting the numbers.Yet, some red flags are emerging beneath the headline GDP figure: personal spending increased at the weakest pace in
almost two years, potentially pointing to growing uncertainty among consumers.
ETMarkets.comThat concern is being echoed in more recent data
With inflation still elevated and tariffs pushing up costs, consumers appear to be scaling back.Confidence data only deepens the concern:
Americans now rate their financial situation lower than at any point in the past 12 years, while expectations for food and rent inflation
This week delivered a trio of signals pointing to a slowdown.First, the National Association of Home Builders Index unexpectedly fell,
slipping to levels last seen during the early days of the 2020 lockdowns.Second, both housing starts and permits declined more than
anticipated, signalling a pullback in future construction activity.Third, homebuilding corporations are beginning to feel the pressure
Recent earnings from major players in the sector have fallen short of expectations, reflecting slower home sales and tightening profit
margins.Despite constrained supply keeping prices elevated, high mortgage rates and deteriorating affordability are weighing on demand
the door for even more borrowing.This comes at a time when the U.S
risks are becoming harder to ignore slower economic growth, rising borrowing costs, and growing investor unease.5
Data is consistently disappointingThe US Economic Surprise Index has tumbled to -23, its lowest level in nine months
When economic data keeps underwhelming, investor enthusiasm eventually starts to crack.Technical outlookGiven the prevailing macro and
market conditions, the technical outlook for U.S
a sharp decline earlier this year
But momentum is fading, and volatility is starting to stir.This confluence suggests the rally may be running out of steam, with the index
vulnerable to a pullback toward 5,682, and if selling intensifies, potentially down to 5,453.Meanwhile, the Nasdaq 100 appears to be echoing
with margin compression, earnings risk, rising layoffs, weakening demand, and unsustainable debt servicing costs, the case for caution
The cracks beneath the surface are getting harder to dismiss.(The author Amit Pabari is MD at CR Forex Advisors)(Disclaimer:
Recommendations, suggestions, views and opinions given by the experts are their own
These do not represent the views of the Economic Times)
