Well, among a host of data reports and political developments that came at us last week, among the most important was the fact that Fed Chairwoman Janet Yellen finally copped to the fact that the domestic economy is indeed moderating. It’s a drum we’ve been banging for some time here at Tematica Research, and like the heard that it is, many on Wall Street quickly followed with a similar assessment. Better late than never we guess.

The scary thing is it comes at a time when the S&P 500 closed last Friday at 18.7x times 2017 earnings per share. At some point, the discrepancy between the economy, expectations and market valuations will have to be reconciled. That’s of course, why we’re here — to break it all down and determine what it means for investors as we head into what will no doubt be some serious readjustments of expectations.

In this Week’s Monday Morning Kickoff:

Last week was another solid week for stocks — a week that saw all the major market indices climb higher week- over-week. The bulk of that move came after dovish testimony by Fed Chairwoman Janet Yellen mid-week, who copped to the fact that the domestic economy is indeed moderating.

For regular readers, that should come as no surprise, as we here at Tematica have been writing about the weakening of the economy for some time here in the Monday Morning Kickoff, on TematicaResearch.com and it’s been the focus of many the conversation on our podcast, Cocktail Investing. We and Janet Yellen are not alone — although if we did get that chance there is much we’d share with her — as the same moderating view of the economy’s speed was also echoed by the latest Fed Beige Book that hit soon after Yellen’s comments.

Data later in the week, including the lack of inflation shown in the June CPI report (another sign we are seeing more deflation than inflation as energy prices fall), the slight improvement in manufacturing industrial production in June and the weaker than expected June Retail Sales report point to another step down in GDP expectations for 2Q 2017.

That’s exactly what we saw with the Atlanta Fed, once again cutting its 2Q 2017 GDP forecast to 2.4 percent. For those keeping score at home, that forecast represents yet another reduction, coming down from the recent 2.7 percent forecast and 4.0 percent in June.

In sum, the week’s data likely means we’ll have even longer to wait for the Fed’s next interest rate hike, especially if the Fed begins to unwind it balance sheet beginning this September.

Drilling into Friday’s June Retail Sales Report

The Retail Sales for June produced month-over-month declines almost across the board as well as confirming signs for our Cash-Strapped Consumer investing theme. The key standouts in the monthly data were Non-store retailers, confirming the shift to digital commerce continues, and building materials. Given the drop in oil prices that is flowing through to gas prices, the fall in the gas station line item came as little surprise. The same can be said about the drop in department store sales, down 0.7 percent month over month, given reports of mall traffic declines.

Before moving on, we’d note the June Retail Sales report caps the data for 2Q 2017 and in tallying the three months, Non-store retail sales rose 10 percent year-over-year, while department stores fell more than 3 percent — not to overstate the obvious, but this is clear cut confirmation of our Connected Society investing theme as well as our Cashless Consumption, and the old mall-based department store is looking more and more like the dinosaur of the retail space. We have yet to see an online or mobile shopping portal that accepts cash or check – if you see one, please let us know.