Inflation ripping higher while real spending collapses is the exact combination that breaks markets and no amount of AI fairy dust changes that math. SPY has just officially topped?

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Keep acting like the consumer is still strong and spending like nothing’s changed… and yeah, it’s going to look fine until it suddenly isn’t.

Inflation still hot and people already stretched, that’s the kind of setup where things can roll over, but timing is always the tricky part.

U.S. inflation picture is the worst in almost 4 years

S&P Global surveys show that companies are willing to pay more for scarce supplies, in an echo of the pandemic

The U.S. economy rebounded a bit in April from the near-stagnation seen in the prior month, but the overall inflation picture is now the most worrying since 2022.

S&P Global’s index of service companies, which employ most Americans, recovered to a reading of 51.3 in April from a three-year low of 49.8 in the prior month. Any number above 50 signals expansion.

Real Personal Consumption Expenditure is growing at just +0.8% on a 3-month annualized basis, the slowest rate since the 2020 Crisis.

The levels are now similar to the ones seen during the 2001 recession.

Personal consumption makes up ~68% of US GDP, meaning a sustained slowdown in real spending poses a direct threat to overall economic growth.

If the consumer slows down, so does the economy.

Goldman Delta One: “There is still a real debate inside the oil complex. One camp argues the curtailment is so severe, especially in refined products, that each additional week becomes disproportionately more disruptive…that you cannot simply put the toothpaste back in the tube on any reasonable timeline. The other argues that once there is a deal, sanctions relief and incremental barrels come back, meaning the pain is acute but fundamentally temporary. Equity markets are very clearly siding with the latter view and looking through the risk of structural consumer damage.”