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Welcome to Markets in a Minute. Today is Tuesday, July 26, 2022.

I am Austin Duke, Founder and Chief Investment Officer of Diamondback Financial Services. I want to highlight one economic data release that came out this morning: Consumer Confidence. Consumer Confidence readings have declined for over a year, and today was no exception. This chart shows Consumer Confidence readings for the past 3 years, including the precipitous drop in March 2020 as lockdowns were initiated and the global economy shut down.

(Source: Bloomberg, Conference Board)

(Source: Bloomberg, Conference Board Bureau of Labor Statistics)

We believe the biggest reason for the decline in Consumer Confidence this year is inflation. As I overlay the inflation readings on this chart, you can see Consumer Confidence declines in lockstep as inflation continues to climb.

(Source: Bloomberg, Conference Board Bureau of Labor Statistics)

We feel Consumer Confidence is very important when we think about the health of our overall economy. This graphic from the JP Morgan Asset Management Guide to the Markets shows consumer consumption makes up more than two-thirds of how we measure our economic growth. If consumers lack confidence, they generally do not spend as much money, which could start a domino effect leading to a recession. We do not see enough economic data to suggest we are currently in a recession, but that can change, and we will continue to watch economic reports as we head into the end of the year.

We at Diamondback Financial are optimistic that inflation readings will decline as the Federal Reserve tightens their monetary policy, and consumer confidence will increase as the cost of goods and services moderate as well. We may see a decline in economic activity, but hope we will avoid the “R” word.

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