US National Debt Spikes by $359 billion, 1st Day after Debt Ceiling Suspended.

The "Fiscal Responsibility Act of 2023," which suspends the debt ceiling till early 2025, was signed by President Biden, putting an end to the debt ceiling charade. Default by the US was "averted." The end of the farce is always predetermined: Congress will reach a last-minute agreement and the President will sign it, as has happened 80 times since 1960. However, getting there could make you anxious. The debt then increases dramatically after the Debt Ceiling Charade is done.

As a result, the Treasury Department revealed that the U.S. national debt had increased by $359 billion in a single day, the first working day following the suspension of the debt ceiling, to reach $31.83 trillion. - Wolf Street

Meanwhile, Let’s Check In With The Fed

The upcoming Federal Reserve meeting is expected to feature significant changes in the economic projections rather than in the statement or the interest rate decision. The Fed has entered its self-imposed black-out period before the Federal Open Market Committee (FOMC) meeting next week. During this period, no further statements are released from Fed officials, leaving investors and analysts to speculate about potential actions. While there is little in terms of new economic data for the week, it is known that Federal Reserve Chairman Jerome Powell is not overly focused on new data.

The Fed is currently divided between ultra-hawks, who advocate for continuous interest rate hikes, and softer raptors, who think the Fed should pause to assess the situation. Despite these divisions, the Fed has managed to shift market views away from the idea of imminent significant rate cuts, largely due to stronger-than-expected job openings and payroll data for May. Market-implied odds now suggest rates will be at their current level or higher through the end of the year, with the first cut projected for January 2024. It is expected that the Fed will pause next week, with an 80% chance of no change to the federal funds target and a 20% chance of a 25 basis point hike.

As for economic projections, the last update was in March, indicating a 0.4% rise in Gross Domestic Product (GDP) from Q4 2022 to Q4 2023, a year-end unemployment rate of 4.5%, and a decrease in inflation to 3.3%, with the core falling to 3.6%. The federal funds rate was projected to be 5.1% by year-end. However, these figures now seem significantly outdated. Current data suggests a 2% GDP growth rate for the second quarter, meaning the GDP estimate will likely be revised upwards.

In contrast, the unemployment estimate is likely to be revised downwards as there seems to be little chance of it rising by another 80 basis points over the next six months. The Personal Consumption Expenditure (PCE) price index rose to 4.4% in April, with core PCE inflation slightly increasing to 4.7%. Given these figures, it would require significant assumptions about aggressive disinflation to adhere to the March projections.

The question remains as to how much Fed officials will raise the median projection for inflation. There is a possibility that they might raise it to 4% for headline PCE and slightly higher for core PCE. If the Fed does not raise the median interest rate projection, it could signal that the institution has been unmoved by two months of data demonstrating stronger economic strength than expected. To maintain credibility in light of the data, the Fed’s median projection is likely to show two more quarter-point hikes. - Breitbart

What Is the Consumer Confidence Index (CCI)?

The Consumer Confidence Index (CCI) is a statistical measure that helps to predict consumer spending patterns in the economy. It is a monthly survey conducted by the Conference Board, which asks a random sample of households about their opinions on current and future economic conditions.

The CCI is used by policymakers, business leaders, and investors to gauge the overall health of the economy and make sound financial decisions. A higher CCI indicates that consumers are more confident in the economy, while a lower CCI suggests a lack of consumer confidence, which can lead to decreased spending and a potential economic slowdown. Therefore, tracking the CCI is a crucial aspect of understanding the economic environment and making informed financial decisions.

“Consumer confidence declined in May as consumers’ view of current conditions became somewhat less upbeat while their expectations remained gloomy,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. - The Conference Board

Currently, our economy is facing a challenging period characterized by several key indicators. GDP growth, a primary measure of economic health, is stagnating or declining, indicating a slowdown in the production of goods and services. Consumer spending, a vital engine of the economy, is down due to lower consumer confidence and reduced disposable income. Inflation is high due to years of cheap money from the FED.

However, it's important to remember that economies are cyclical and periods of downturn are often followed by recovery. We are closely monitoring the situation and will make strategic adjustments as necessary to navigate these challenging conditions.

It should be obvious that the world we live in today is not filled with an upbeat population. The good news is clear, we understand market cycles and the effect of interventions by the FED, and public policy.

Indeed, now is time for patience, and wisdom.