Temporary Prosperity is Ending

"The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists." -Ernest Hemingway

Tempting as it may be for bears to cherry-pick the META earnings selloff and ignore the GOOGL rally (with MSFT in the middle of those two), the more compelling bearish price action can be found in those ongoing bearish trends in prominent consumer/retail names. 

For a while now, both here and with Members, we have been tracking a laundry list of those consumer/retail duds, as marquee brands like Starbucks have been cracking for a while now. 

But with Chipotle and Sprouts down 15% and 25%, respectively after their earnings today, it drives home the point that these bearish trends are only gathering steam downhill. On the CMG weekly chart, updated below, for example, the series of rolling tops we have been tracking decisively broke down to confirm. 

But beyond these firms on a micro basis, the larger picture from a macroeconomic standpoint is that entrenched inflation eventually squeezes profit margins to no end.

You should expect tons of restaurants to close over the next few quarters as it is simply not viable to keep the lights on in this environment. And that may have an even greater inflationary impact, especially with this Fed and this White House/Congress continuing their easy money policies--Recall that the definition of inflation is too much money chasing too few goods. 

Other retail/consumer names which continue to weaken: CAVA EAT TXRH, all names which not too long ago were essentially high-flying momentum names to the upside. Ultimately, the retail/consumer monsters like COST V (both already softening in recent months) will need to have some ugly earnings reactions to confirm the bloodbath. But the new trend lower is certainly on track, as entrenched inflation is rearing its ugly head. 

And what makes it even more ominous in this cycle is that it is happening in the dark corner of Wall Street while investors remain giddy about AI. Put another way, we have serious deterioration in the consumer amid outright euphoria in the Nasdaq.