Here’s why US growth could wither this year

Several signs are pointing to soft earnings and economic growth, according to Gina Sanchez, CEO of Chantico Global.

"I'm specifically looking at the divergence between the soft data, like consumer confidence, and the hard data, like retail sales. Consumer confidence was pacing well above retail sales for many months now, and we are starting to see that start to slow and come back to the reality that retail sales numbers never picked up pace," Sanchez said Friday on CNBC's "Trading Nation."

Indeed, the most recent retail sales missed expectations, and other data points such as personal income and auto sales have recently missed expectations.

All of this signals to Sanchez that the economy is in a recovery mode, but that recovery is "likely going to continue to be modest."

"We believe that expectations have, as usual, gotten ahead of reality. We think that we are still in 2 percent growth mode, going through the rest of the year," she said.

Specifically, sectors that could under-deliver toward the end of the year are consumer-related areas such as consumer discretionary. A relatively weak U.S. dollar also adds to Sanchez's less-than-optimistic outlook.

"We see a weak dollar, and that weak dollar is likely to be inflationary. That is going to be a challenge when wage growth has not matched pace with the rest of inflation," she said. The dollar index on Friday logged its biggest daily performance since January, though the greenback is still weak on a year-to-date basis against many foreign currencies.

In the monthly employment situation released Friday, average hourly wages rose in line with expectations, but remained sluggish on an annual basis. Unemployment ticked down to 4.3 percent.

"We think, given the outlook for growth, earnings could under-deliver at the end of the year. That, in combination with what we think is a high [price-to-earnings ratio] relative to all the external risks to [price-to-earnings ratio], could create a situation where investors should be considering consolidating their positions and getting into wait-and-see mode for the end of the year," Sanchez said.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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