Expect Powell to Pivot Again By August

One can reasonably expect him to do what he does best: Pivot

Highlights

• Recent behavior suggests another Powell pivot is expected

• Poorer U.S. consumers continue to “trade-down”

• Chicago PMI is the latest reminder of the industrial recession

• Slowing wage trends are at odds with a hawkish Fed

While We Were Sleeping

Anyone who read the latest Fed Beige Book and saw the “trading down” effect would have known full well that Starbucks was going to miss. Sales fell -4% YoY in the first coffee drop since 2020 — the consensus was +1.5%! Same-store sales, revenues, and profits all missed. At the same time, Amazon crushed it. The difference is that Starbucks is completely discretionary while Amazon is a borderline utility. That is a very interesting difference. But it smacks of an early recession sign when households start brewing their own.