THE GREAT SLOWDOWN: 10 REASONS WHY THE ECONOMY WILL STRUGGLE IN Q2

The new quarter is here, but unfortunately, we're still seeing the same bad trend as before. There are several problems we're facing, such as lost pricing power, tighter credit, not having enough money to spend, and more situations that are making things harder for people. It's also affecting the way businesses are performing.

We need to be careful because the situation is fragile and there are risks involved. We need to update our plans and be vigilant as we potentially go deeper into the woods of the bear market. It's crucial that we carefully watch out for what might happen next.

For a while now, there have been a lot of problems building up in this economy where we've seen a slowdown in growth and increase of inflation. Here are 10 indicators that suggest economic conditions will continue to decline in Q2.

1. Real Goods consumption has been in a downward trend since March 2021^[1]

When people stop buying things they need, like food, clothes, and electronics, it can cause big problems for the economy. This is because when people aren't buying goods, companies aren't making money, and they may have to lay off workers. When more people lose their jobs, they have less money to spend, which means they buy even fewer things. This creates a cycle where the economy slows down and things get worse for everyone.

One reason people might stop buying things is if prices are too high. When prices are high, people may decide they don't need to buy as much, or they might look for cheaper options. This can cause companies to lose money and may force them to cut jobs or raise prices even more. Another reason people might stop buying things is if they don't have enough money. When people are struggling financially, they may prioritize paying bills over buying new things, which can hurt the economy.

2. Real manufacturing orders have been going down since mid 2022 ^[2]

Real manufacturing orders are a measure of the amount of goods that companies are ordering from manufacturers. When real manufacturing orders are going down, it means that companies are not buying as many goods from manufacturers as they used to. This can be a sign that the economy is slowing down because if companies are not buying as many goods, it may be a sign that they are not selling as much to their customers either.

This decline in real manufacturing orders can also lead to a decrease in employment because if companies are not buying as many goods from manufacturers, then the manufacturers may need to lay off workers. This can lead to a ripple effect throughout the economy as those laid off workers may have less money to spend on other goods and services, which can further slow down the economy. Additionally, if there is a decrease in demand for goods, it can also lead to a decrease in production, which can impact the profitability of manufacturers and other related industries.

3. Capital Expenditures is going down since March of 2022^[3]

Capital expenditures (also known as CapEx) is the money that businesses spend on long-term investments such as building new factories, buying equipment, or developing new technology. When businesses are spending less on these types of investments, it often means that they are not confident about the future of the economy.

When capital expenditures are going down, it can have a ripple effect throughout the economy. For example, if a business is not investing in new equipment, it may mean that they are not expanding their production capacity. This could lead to a decrease in jobs, as there is less demand for labor. It could also mean that the business is not able to keep up with the competition, which could eventually lead to lower profits or even bankruptcy.

Additionally, when capital expenditures are going down, it can also mean that there is less innovation happening in the economy. Without new investments in technology or research and development, businesses may struggle to stay competitive in the long term. This could slow down overall economic growth and potentially lead to a recession.

4. Purchasing power is in trouble as real earnings growth has been negative since January 2021 ^[4]

When real earnings growth is negative, it means that people's income is not keeping up with the rising cost of living. In other words, people are not making enough money to buy the same amount of goods and services as they used to. This is not good for the economy because it can lead to decreased consumer spending. When people have less money to spend, they are less likely to buy things, which can hurt businesses and their ability to grow and hire new employees.

Negative real earnings growth can also have a ripple effect on the stock market. Companies may see their profits decrease if consumers are not buying their products or services, which can lead to lower stock prices. Additionally, if people are struggling financially, they may not be able to invest in the stock market, which can further depress stock prices. Overall, negative real earnings growth can be a sign of an unhealthy economy that may need intervention from policymakers to stimulate growth and increase incomes for workers.

5. Consumer credit squeeze ^[5]

Credit card balances are on the rise while interest rates are increasing while people's personal financial situation is in one of the worst positions in a long time.

When credit card balances are on the rise, it means that people are spending more money on their credit cards than they can pay back. This is a problem because they will have to pay interest on that balance, which makes it harder to pay off in the future. Meanwhile, if interest rates are increasing, it means that the cost of borrowing money is going up. This can make it even harder for people to pay off their credit card balances, as the interest they owe will also increase.

When people's personal financial situation is in one of the worst positions in a long time, it means that they are struggling to make ends meet. This can be due to a variety of factors, such as job loss or an increase in expenses. If people are struggling to make ends meet, they may be more likely to rely on credit cards to cover their expenses, which can lead to an increase in credit card balances. This can create a cycle of debt that can be difficult to break free from. Overall, an increase in credit card balances and a worsening personal financial situation can be indicators of financial stress and economic hardship for individuals and the economy as a whole.

6. Inventories investments have been declining ^[6]

When inventories investments decline, it means that businesses are not stocking up on goods as much as they used to. This can indicate a few things about the economy. First, it may mean that demand for goods is slowing down, so businesses don't need to hold as much inventory to meet customer needs. Second, it may mean that businesses are uncertain about the future and don't want to take on the risk of holding large amounts of inventory that may not sell.

Either way, declining inventory investments can have ripple effects on the economy. For example, if businesses are not purchasing as many goods from suppliers, suppliers may see a decrease in sales and revenue. This, in turn, could lead to job losses and a decline in consumer spending. Additionally, if demand for goods does not pick up, it could lead to a slowdown in production and even a recession. Therefore, it's important for economists and policymakers to keep an eye on inventory investment trends and take action if necessary to support businesses and the overall economy.

7. Housing affordability at an all time low ^[7]

Housing affordability is a measure of how easy or difficult it is for people to afford to buy a home. When housing affordability is at an all-time low, it means that homes are becoming more and more expensive and it's becoming harder for people to afford to buy them. This can have a big impact on the economy as a whole.

For one, it can lead to a decline in the number of people who are able to buy homes, which can hurt the real estate industry. This, in turn, can lead to a slowdown in construction activity, which can have a ripple effect on other industries that rely on the construction sector. Additionally, when fewer people are buying homes, it can lead to a decline in consumer spending, as people are less likely to spend money on furnishings and other goods associated with homeownership.

Moreover, when housing affordability is low, it can also lead to social and economic inequality, as those who are unable to afford a home may be forced to rent or live in substandard housing, which can have negative impacts on their health and well-being. It can also exacerbate wealth inequality, as those who own homes may see their wealth increase, while those who don't may struggle to get by. All of these factors can have a significant impact on the economy, and it's important for policymakers to address them in order to ensure a healthy and stable housing market.

8. ISM services is reading as a contraction ^[8]

When the ISM services reading is in contraction, it means that the service sector of the economy is shrinking instead of growing. The Institute of Supply Management (ISM) releases monthly data on the performance of the service sector, which includes industries such as healthcare, finance, and retail. The data is based on a survey of purchasing managers in these industries and provides an important indicator of economic activity.

A contraction in the service sector is significant because it accounts for a large portion of the US economy. When businesses and individuals spend less on services, it can indicate a slowdown in consumer demand and overall economic growth. It can also mean that companies are cutting back on their hiring and investment plans, which can lead to higher unemployment and lower wages. Policymakers may use this information to adjust monetary and fiscal policies to stimulate economic growth and support businesses and households.

9. M2 - Money supply has been in the worst position since 1930s ^[9]

M2, also known as the money supply, is an important measure of the amount of money circulating in the economy. When M2 is in a bad position, it means that there is less money available to spend, invest, or lend. This can have a big impact on the economy, as people and businesses may struggle to access the funds they need to grow or make purchases.

The fact that M2 is in the worst position since 1929 is concerning, as this was the start of the Great Depression, a period of severe economic downturn. This suggests that the economy may be headed for another downturn or recession, as there may be less money available for businesses to invest, consumers to spend, and banks to lend. This can lead to a cycle of declining economic activity, job losses, and reduced consumer spending, which can further exacerbate the problem. It's important for policymakers and economists to monitor M2 and take steps to address any underlying issues that may be contributing to the decline in money supply.

10. ISM leads margin is lowering ^[10]

When we talk about the "ISM lead margin," we are referring to the gap between the prices that manufacturers pay for raw materials and the prices they can charge for finished goods. When this lead margin is decreasing, it means that manufacturers are paying more for raw materials than they can sell their finished products for. This is not a good sign for the economy, as it indicates that manufacturing is becoming less profitable.

When manufacturing becomes less profitable, it can lead to several negative effects on the economy. For example, manufacturers may cut back on production or lay off workers to save money. This can cause a ripple effect throughout the economy, as workers who have lost their jobs may have less money to spend on goods and services, leading to a decrease in demand for those goods and services. Additionally, if manufacturers are not making as much money, they may be less likely to invest in new equipment or technology, which can slow down innovation and economic growth over time. Therefore, a decreasing ISM lead margin is a warning sign for the economy that requires careful attention and analysis.

As these market conditions persist, it's going to be even harder to get money from banks, and people and businesses are going to have a hard time getting the money they need. This is because there are too many problems with things like prices going up and people not having jobs.

These problems are going to keep building up and things will only get worse. We can't be sure exactly when something really bad will happen, but we need to be ready for it because it could happen at any time.

Moving Forward

In tough times, people want to find something they can count on. In Quad 4, that "thing" is a group of three things: Gold, the US dollar, and Duration. Most things are getting cheaper because people aren't buying as much, but Gold has been going up in value.

We don't know how bad things will get because of decisions made by people in charge, but we do know that eventually they will have to do something to fix it. When that happens, they will probably print more money. Investors who know this are buying Gold now, so they can make money later when its value goes up even more. Gold is like a safe place to put your money when things are going bad.

Without a well thought out plan, your wealth is most likely to contract as the market and economy contracts.

Our goal at Abundance is to help you prosper regardless of the economy. Our Directional Portfolios aim to build a portfolio that will adjust with the business cycle. If you'd like to learn more, you can call or text at 678.884.8841 or email us at connect@findabundance.com.

Sources

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EXPLORING CENTRAL BANK DIGITAL CURRENCY (CBDC): THE FUTURE OF MONEY

By Tom Hermann (Chief Investment Officer) • July 14, 2023

The financial landscape is evolving rapidly, and central banks worldwide are embracing the concept of Central Bank Digital Currency (CBDC) as a means to modernize their monetary systems. CBDCs are digital currencies issued by central banks with their value linked to the issuing country’s official currency. The idea of CBDCs is gaining traction globally, with 87 countries actively exploring their implementation [1] . These 87 countries represent over 90 percent of global GDP. In this week's update we will delve deeper into how CBDCs will work, their benefits, and the unnerving risks they present to privacy and freedom. How Will CBDCs Work? In theory, CBDCs have the potential to digitize and replace physical currency. They are digital representations of a country's official currency, and will be issued and regulated by that country's central bank. The main goal for digitizing traditional money is to make it more accessible, efficient, and secure. The emergence of cryptocurrencies like Bitcoin and the growing importance of digital payments have propelled the exploration of CBDCs as a modern financial tool. CBDCs have the potential to revolutionize financial transactions by streamlining processes and reducing costs. In the current financial system, each bank operates its own payment tracking system, resulting in delays and inefficiencies when multiple banks are involved in a transaction [2] . However, since CBDCs would be handled by the central bank it would allow for all the transactions to be consolidated onto a single ledger, enabling instant clearing of payments and universal acceptance, regardless of the payment method or platform used [2] . Ultimately, if this idea comes to fruition, it will eliminate the need for banks that are not the central bank. Benefits of CBDCs CBDCs would require a complete overhaul of the financial system. Therefore, CBDCs must offer several significant advantages to justify that type of overhaul. Here are the some of the most prominent benefits for CBDCs: Reduced Costs - One key benefit is the potential for reduced costs. By shifting focus from physical infrastructure to digital finance, financial-service providers could save an estimated $400 billion annually in direct costs [3] . Increase speed - CBDCs have the capacity to enhance the speed and efficiency of electronic payment systems, benefiting both individuals and businesses. Appeal to the unbanked - CBDCs offer a solution for people who do not have access to a bank account. According to a survey from 2016, 1.6 billion people around the world did not have a bank account. Another statistic shows that less than 5% of adults do not have a bank account [3] . CBDCs have the potential to increase financial inclusion, empowering those without bank accounts, but adoption isn’t a guarantee as many underbanked people may favor the total anonymity that comes with using cash. Heightened Security - This is a byproduct of the speed and single bank ledger. Private key cryptography could be implemented for users to "sign off" on transactions digitally, and they would become finalized and unalterable in a short period of time [3] . Risks and Concerns While CBDCs offer numerous benefits, they also come with risks and concerns that must be carefully addressed. One major concern is the potential for increased governmental control. Although no central bank currently plans to restrict CBDC usage, the hypothetical possibility of the government deciding which purchases are permissible raises privacy and individual freedom concerns. Additionally, the traceability of digital currency may lead to increased taxation, as every transaction becomes easily traceable. Technological stability is another challenge, as evidenced by the temporary shutdown of the digital version of Eastern Caribbean DCash due to technical issues [4] . Let's take a moment to go more in depth on the potential for governmental control. The following is a quote from professor Eswar Prasad. Prasad is a professor at Cornell University and the author of The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance. Prasad made this statement while speaking at the World Economic Forum's annual meeting of the new champions. “You could have, as I argue in my book, potentially better and some people might see a darker world, where the government decides that unit, so central bank money can be used to purchase some things but not other things that are deemed less desirable, like, say, ammunition or drugs or pornography or something of the sort. And that is very powerful in terms of the use of a CBDC and I think also extremely dangerous for central banks” [5] Prasad noted that he was only speaking hypothetically and said, “No central bank is contemplating any such uses for its CBDC but, as an academic, it is important for me to point out all the possibilities and potential—both good and bad—of a world in which all payments are digital and anonymity might be limited (relative to the use of cash).” [5] This is possible because CBDCs are programmable. For example, a CBDC could be programmable where it can only be used for certain items or even have an expiration date – which would ultimately force spending. This allows for CBDCs to make it much easier for a centralized authority to dictate and control human behavior because they can restrict the flow and opportunities if you are not behaving in a manner that they're requesting. This is very evident in China's social credit system. Use Cases for CBDCs It's important to balance the potential benefits of CBDCs with concerns related to individual privacy and governmental control. This is highlighted by China's social credit system. The China social credit system is a broad regulatory framework intended to report on the ‘trustworthiness’ of individuals, corporations, and governmental entities across China [6] . China’s “Social Credit System” rates its citizens based on their behaviors, and those who score well get privileges; those who score poorly do not. A citizen with a high score is likely to enjoy various privileges—high-speed internet, the ability to travel freely, access to the best restaurants, golf courses and nightclubs—that fellow citizens do not [7] . There are many ways to lose points and lower one’s social credit score, depending on the city where the offense takes place. Some of the more trivial score-lowering actions include: not visiting their parents on a frequent basis, jaywalking, walking a dog without putting it on a leash, smoking in a non-smoking zone, and cheating in online videogames [6] . A citizen with a poor social credit may experience one of these forms of punishment [6] : Travel bans Reports in 2019 indicated that 23 million people have been blacklisted from traveling by plane or train due to low social credit ratings maintained through China’s National Public Credit Information Center [6] . School bans The social credit score may prevent students from attending certain universities or schools if their parents have a poor social credit rating. For example, in 2018 a student was denied entry to University due to their father’s presence on a debtor blacklist [6] . Reduced employment prospects Employers will be able to consult blacklists when making their employment decisions. In addition, it is possible that some positions, such as government jobs, will be restricted to individuals who meet a certain social credit rating [6] . Increased scrutiny Businesses with poor scores may be subject to more audits or government inspections [6] . Public shaming In many cases, regulators have encouraged the ‘naming and shaming’ of individuals presented on blacklists. In addition, flow-on effects may make it difficult for businesses with low scores to build relationships with local partners who can be negatively impacted by their partnership [6] . CBDCs can also allow the government to be more targeted in their efforts to manage economic growth. One such case is the ability to combat inflation effectively. With the flexibility of CBDCs, central banks can implement different interest rates on specific balances or accounts, allowing for more precise monetary policy implementation. CBDCs also have the potential to support targeted stimulus efforts by directing funds to designated sectors or implementing expiration dates to encourage spending [8] . Implementation Timelines The timeline for CBDC implementation varies by country. In the United States, the Federal Reserve is already taking steps to address transaction inefficiencies by launching the FedNow digital payments system by the end of July 2023. This system aims to provide low-cost bill payments, money transfers, paychecks, government disbursements, and other consumer activities [9] . Time will tell when this will be fully implemented in the United States, but many see the implementation of FedNow as the first step toward a CBDC. Globally, a recent survey suggests that by 2030, approximately 24 central banks will have implemented digital currencies. This projection highlights the increasing global adoption and recognition of CBDCs as a fundamental part of future financial systems [10] . It is not a foregone conclusion that CBDCs will be implemented as there is plenty of opposition to the idea. Senator Cruz from Texas and Governor DeSantis from Florida have both introduced legislation to prohibit the Fed from establishing a CBDC [11][12] . If CBDCs take over the financial system, it appears there will be minimal options for those who do not want to participate in the system. Some of those options may include: using bitcoin that is established on a decentralized platform with options for privacy and anonymity, using physical precious metals like gold and silver, and/or exchanging value for value like in an archaic bartering system. Conclusion Central Bank Digital Currencies have the potential to revolutionize the way we transact and interact with financial systems. By leveraging digital technologies, CBDCs can offer reduced costs, increased speed, improved financial inclusion, and heightened security. However, careful consideration must be given to the risks associated with potential governmental control, privacy concerns, and technological stability. As countries progress toward a digital economy, CBDCs will play a pivotal role in shaping the future of money, transforming financial systems and enhancing economic efficiency on a global scale. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situati on. Sources: https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-central-bank-digital-currency-cbdc https://www.forbes.com/advisor/investing/digital-dollar/ https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-central-bank-digital-currency-cbdc https://www.bloomberg.com/news/articles/2022-02-21/eastern-caribbean-dcash-outage-is-test-for-central-bank-digital-currencies?sref=YMVUXTCK https://apnews.com/article/fact-check-world-economic-forum-cashless-society-false-cbdc-592718364311 https://nhglobalpartners.com/china-social-credit-system-explained/ https://fee.org/articles/china-s-social-credit-system-sounds-pretty-dystopian-but-are-we-far-behind/ https://financialpost.com/fp-finance/cryptocurrency/central-bank-digital-currency-inflation-fighters-best-friend https://www.forbes.com/advisor/investing/digital-dollar/ https://www.reuters.com/markets/currencies/twenty-four-central-banks-will-have-digital-currencies-by-2030-bis-survey-2023-07-10/ https://www.cruz.senate.gov/newsroom/press-releases/sen-cruz-introduces-legislation-to-prohibit-the-fed-from-establishing-a-central-bank-digital-currency https://www.flgov.com/2023/03/20/governor-ron-desantis-announces-legislation-to-protect-floridians-from-a-federally-controlled-central-bank-digital-currency-and-surveillance-state/

THE WARNING SIRENS: RISING INTEREST RATES AND SLOWING BUSINESS PERFORMANCE ARE HARBINGERS OF ECONOMIC CHALLENGES

By Tom Hermann (Chief Investment Officer) • July 7, 2023

The global economy is facing increasing pressures, and there are growing concerns about a potential recession on the horizon. Two significant indicators that have historically foreshadowed economic downturns are an inverted yield curve and Purchasing Managers' Index (PMI) readings below 50. Over the past couple of months these two indicators have continued to point in the direction of an impending recession. In this week’s update, we will explore the historical context and significance of these indicators and analyze their current implications for the economy. Understanding the Inverted Yield Curve: An inverted yield curve occurs when short-term interest rates exceed long-term rates, typically reflected in the inversion of the two-year and 10-year Treasury yields. An inverted yield curve is often viewed as an indicator of a troubled economy because it deviates from the normal yield curve shape, where longer-term interest rates are typically higher than shorter-term rates. In an inverted yield curve scenario, short-term interest rates exceed long-term rates, implying that investors have lower expectations for future economic growth and inflation. This phenomenon has been a reliable recession predictor in the past, and suggests that the global economy is headed toward a recession despite the stock market trading near all-time highs 1 . The Fed chose to pause rate hikes during their June meeting, but many expect the rate hikes to continue in the future 2 . Persistently raising short-term rates in an inverted yield curve environment can increase the risk of an economic slowdown or recession. The inversion of the yield curve itself is often seen as a reliable predictor of economic downturns. By continuing to tighten monetary policy in this scenario, the Fed may unintentionally contribute to a deeper and more prolonged recessionary environment. PMIs Indicating Economic Contraction: PMIs, or Purchasing Managers' Indexes, are widely used economic indicators that provide valuable insights into the health and performance of various sectors within an economy. They are based on surveys conducted among purchasing managers in manufacturing, services, construction, or other sectors. The purpose of PMIs is to gauge the prevailing business conditions, sentiment, and trends within a specific sector or the overall economy. When a PMI reading falls below 50, it indicates economic contraction. The US manufacturing sector's recent contraction, raises concerns about the overall economic health and suggests a challenging road ahead 3 . The ISM Manufacturing PMI came in at 46 in June, down from 46.9 in May. This is the lowest reading since July 2020 3 . The manufacturing sector is followed closely due to it strong linkages with other sectors of the economy. Changes in manufacturing activity can impact supply chains, employment levels, and the performance of related industries. Manufacturing job losses can have a cascading effect on the economy, impacting consumer spending and business investment, and further contributing to the likelihood of a recession. Analysis of Current Economic Indicators:

RESILIENCE AND VULNERABILITIES: DECODING THE GLOBAL ECONOMY'S STORY

By Tom Hermann (Chief Investment Officer) • June 30, 2023

Amidst upwardly revised GDP growth and declining jobless claims, underlying risks such as banks prioritizing financial stability and a decline in global manufacturing cast a shadow of uncertainty. In this week's update, we delve into crucial economic factors that are currently shaping the global landscape. By examining manufacturing PMI, banks' defensive stance, and the resilience observed in the US economy, we aim to provide valuable insights into the current state of affairs. Manufacturing PMI and Recession Signals The S&P Global Flash US Manufacturing PMI™ is a widely recognized economic indicator that measures the performance of the manufacturing sector. In June 2023, the PMI dropped to 46.9 [1] , raising concerns about a potential recession. The PMI measures the performance of the manufacturing sector based on surveys conducted among purchasing managers. It provides an overview of various aspects, including new orders, production levels, employment, supplier deliveries, and inventories. A reading above 50 indicates expansion, while a reading below 50 suggests contraction. This decline from 51.0 in May marks the lowest reading since February 2020. The contraction in the manufacturing sector is primarily driven by a slowdown in new orders and production [1] . Manufacturing PMI is an important indicator as it reflects the overall economic health of a country. The slowdown in new orders and production can be influenced by various factors such as changes in consumer demand, supply chain disruptions, labor shortages, trade policies, and global economic conditions. However, in this instance, the largest contributors are a drop in consumer demand and global economic conditions. Historically, there is a correlation between manufacturing PMI contractions and economic recessions. For instance, during the global financial crisis of 2008-2009, the PMI readings dropped significantly, signaling an economic downturn. Similarly, the PMI contraction in 2020 preceded the economic recession triggered by the COVID-19 pandemic. This makes it an important signal for investors and businesses to monitor [1] . Defensive Posture of Banks Worldwide Banks worldwide have been adopting a defensive posture, which further signals potential trouble ahead [2] . A defensive posture means that banks are taking measures to mitigate potential risks and ensure financial stability. Specific actions can include increasing capital reserves, tightening lending standards, reducing exposure to high-risk assets, enhancing risk management practices, and diversifying their portfolios to minimize vulnerabilities. The cautious approach of banks reflects their awareness of potential risks in the economy. By adopting a defensive posture, banks aim to protect themselves from financial shocks, economic downturns, and uncertainties. This cautious approach contributes to overall economic stability by reducing the likelihood of systemic risks and enhancing the resilience of the financial system. When banks take this defensive posture, it becomes a greater priority to be fiscally stable than make loans - which are the main revenue source for banks. In my opinion, this is something to watch as many commerical real estate loans come due in the next 12-18 months. As interest rates have significantly increased over the past 12 months, it will be challenging for businesses to renew those loans which will negatively impact the banks and their revenue [3] . Signs of Resilience in the US Economy Despite concerns highlighted by manufacturing PMI numbers and the defensive posture of banks, positive news emerges from the US economy. First-quarter GDP growth has been revised up to 2.0% from 1.3% [4] , indicating ongoing economic expansion. The revision of first-quarter GDP growth from 1.3% to 2.0% indicates that the US economy is expanding at a slightly faster pace than previously estimated. This upward revision suggests stronger economic performance and reflects positive momentum. Additionally, weekly jobless claims in the United States fell to their lowest level since October 2021 [4] . The decline in jobless claims to their lowest level since October 2021 signifies a that the labor market is showing signs of resilience. In previous weeks we've discussed the impact of labor hoarding and how it could be affecting these weekly numbers. The revised GDP growth and the decline in jobless claims reflect the resilience of the US economy. However, it is important to note that the economy is growing at a slower pace compared to previous quarters [4] . The Federal Reserve's efforts to combat inflation may influence future economic growth. While positive indicators exist, rising inflation and external factors such as the war in Ukraine could impact the possibility of a future recession [4] . Conclusion In summary, considering the manufacturing PMI numbers, the defensive stance of banks, and the positive indicators in the US economy, the outlook for the next 6-12 months remains uncertain as we are getting mixed signals across the global economy. There are some encouraging signs for the US economy as the labor market appears to be resilient. However, there's an undertone of vulnerability that warns of potential risks that could lead to a sharper downturn if not carefully managed. Our Directional Portfolios aim to build a portfolio that will adjust with the business cycle. If you'd like to learn more, you can call or text at 678.884.8841 or email us at connect@findabundance.com . The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situati on. Sources: https://www.pmi.spglobal.com/Public/Home/PressRelease/6e8efbfbddde43f29eb12c5193939625 https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230302~41273ad467.en.html https://fortune.com/2023/06/26/commercial-real-estate-office-downturn-outlook-goldman-sachs-morgan-stanley-ubs-pwc-bofa/ https://www.reuters.com/markets/us/us-weekly-jobless-claims-fall-first-quarter-gdp-revised-higher-2023-06-29/

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