US stocks might be switching gears

As we get ready to close the March quarter, domestic stock market indices have switched gears as the euphoria and hope that filled the market post-election has given way to sobering data that the domestic economy is once again slowing.

While some focus on the modest bump higher in 4Q 2016 GDP, to us it means the current quarter is slowing a tad more than we thought and that is poised to weigh on earnings expectations as are a number of other headwinds.

With real average weekly wage gains dipping in February, rising bank card and subprime auto delinquencies rising, and banks once again tightening loan purse strings, there are a number of reasons to suspect GDP expectations for the coming quarters are likely to be revised lower.

Today the Atlanta Fed's GDP now forecast was revised back down to again sit at 0.9 percent for the first quarter - not exactly a rip-roaring economy. The fact that automotive companies are trotting out more and more incentives to goose demand, especially General Motors, is a tad worrisome to us.

Also too, let's not forget the now increasingly expected push out in infrastructure spending and tax reform, all of which is likely to take some of the hope out of corporate forecasts in the coming weeks. This should make for an interesting March quarter earnings season as hope and optimism come face to face with the stark reality of the economy at a time when market valuations are stretched well into historically very high levels.

Already we see gold trade higher, and financials trade off, which while somewhat confirming also raises questions about the Fed's ability to continue to boost interest rates in the coming months. It wouldn't be the first time the Fed embarked on a rate hike cycle at the wrong time.

All this while the latest data from the New York Stock Exchange shows cash borrowed to buy shares, better known as margin debt, hit a record $528.2 billion in February, up from its prior high of $513.3 billion in January.

Again, this is happening at a time when stock valuations are stretched, and earnings expectations are confronting a far slower economic backdrop. All that buying on margin just means that any significant pullback has the potential to be a lot more volatile as that leverage works in both directions.

As you get ready to buckle up for potentially turbulent market waters, we continue to follow our investing north star - our thematic perspective. Looking in and around our daily lives, we continue to find confirming data points for these multi-year tailwinds.

Case in point, for our Food with Integrity investing theme, Starbucks is embracing gluten-free food, and Chipotle Mexican Grill is removing artificial additives in a bid to offer a cleaner food much like Panera Bread. We found a Verifone mobile payment reader at an Exxon Mobil gas pump and used Apple pay to fill up our tank - a new application for Cashless Consumption, and one that even Verifone didn't realize was released "into the wild."

We've heard quite a bit about brick & mortar retail pain, but the wide earnings miss from must-have yoga pants company Lululemon that shared mall traffic is weak means it's more than just Payless, Bebe, Gap, Macy's and JC Penney that are feeling the pinch.

On the podcast we discuss a new wrinkle to the mall pain - more people working multiple jobs likely means those consumers have no time to visit let alone shop at the mall, another reason for the pick up in digital commerce where bargain shopping for those Cash-Strapped Consumers is so much easier. Yet one more reality supporting our view that headwinds abound for mall REITs, like Simon Property Group.