The inventory to sales ratio for business is rising rapidly. Translation: Inventories are rising much faster than sales.
What will business do? They will have to cut production to reduce the growth of inventories.
Bottom line: The sharp rise in the inventory/sales ratio is anticipating much slower growth in production and business activity.
Investment implications: bond yields will remain at around current levels. The Fed will not raise interest rates any time soon. Commodities, including oil, copper, lumber, and gold, will go nowhere. The stock market will rise in anticipation of more Fed easing.
Enjoy the party!
George Dagnino, PhD
The Peter Dag portfolio
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