Economic Data Stinks. Does It Matter?

So far this morning, US economic data has missed across the board:

-Retail sales were flat in July vs. consensus of +0.4%
-PPI was -0.4% vs. consensus of +0.1%
-U. of Michigan Sentiment for August was 90.4 vs. 91.5 consensus

There is often a major disconnect between economic data and stock prices, but let's dive in anyway.

Individual economic data points are not very important. They may have a short-term impact, but trends are what really matter for markets (and central banks for that matter.)

The trend is what really matters.

So let's look at the trend.

The Citi US Economic Surprise Index has surged this year — especially after the June 24 Brexit:

However, it took a big hit on the weak July 29 GDP report, and this recent streak of mixed data may be hurting the trend.

And now, perception of the Fed (which is way more important than what the Fed actually does), is shifting back towards dove territory.

Fed funds futures now indicate a 39% chance of a December rate hike, down from 47% last week.

This is giving the big G.U.T.S. trade (gold, utilities, Treasuries, silver) quite a revival.

And we are seeing weakness in banks, particularly the regionals (KRE).

That means the numbers are on the verge of starting to matter.

But this is just a start — follow-through is what matters.

If the banks really start faltering and the G.U.T.S. trade takes on new life, then the data may in fact mean something.

Let's not get excited until things get exciting.

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