Aug 19, 2024

Economic Anxieties Subside

Markets settled down in Japan, and the latest economic reports in the U.S. aren’t signaling that the economy is headed for an imminent recession.

These factors sparked a strong rally in U.S. stocks last week.

Led by a 3.6% rise in auto sales, the U.S. Census Bureau reported that retail sales jumped 1.0% in July.

The surge in car sales can be attributed to a rebound at dealerships that were held back in June by a
cyberattack that depressed sales. In June, auto sales slid 3.4%.

While July’s headline is overstating strength, the underlying current is flowing in the right direction.

The graphic below illustrates the monthly change in retail sales (blue bar), and the monthly change in retail sales excluding autos and gas stations (helps filter for changes in gas prices).

Ex-autos and ex-gas stations, the moving average over the last three months is the highest of the year.

Good cheer, however, is not being spread equally.

According to the Wall Street Journal, one large home improvement retailer warned last week that consumer weakness is affecting sales.

Yet the remark, “We have not seen any incremental fraying of consumer health,” came just two days later from the chief financial officer of the world’s largest retailer (Wall Street Journal).

The economy isn’t creating the massive number of jobs we saw a couple of years ago (nor was that sustainable).

And, as the Wall Street Journal pointed out last week, “Suddenly, hourly workers aren’t so hard to find.” But the economy is slowly grinding higher.

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Advisor. Securities offered through Valmark Securities, Inc., Member FINRA/SIPC | 130 Springside Drive Suite 300 Akron, OH 44333-2431 | 800.765.5201. FDP Wealth Management, LLC is a separate entity from Valmark Securities, Inc. If you do not want to receive further editions of this weekly newsletter, please contact me at (949) 855-4337 or e-mail me at info@fdpwm.com or write me at 8841 Research Drive, Suite 100, Irvine, CA 92618. FDP Wealth Management, LLC, Valmark Securities, Inc. and their representatives do not offer tax or legal advice. You should consult your tax or legal professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

RELATED POSTS

August Melt-Up Follows Brief Meltdown

Market pullbacks are to be expected. They are incorporated into the financial plan. But like an unexpected traffic jam, they are exceedingly difficult to predict. Early August was one such event. The turbulence began at the end of July in the wake of seemingly minor news—the U.S. BLS reported another rise in the unemployment rate, which forced some investors to re-evaluate their view of a recession.

Then and Now

Overbuilding, speculation, and easy access to credit encouraged a housing boom and a bust in the 2000s. Sales cratered later in the decade, and along with it, prices tumbled. Today, housing sales have plummeted once again.

Powell’s Victory Lap (Sort Of)

Fed Chief Powell’s much-anticipated speech against the picturesque backdrop of the Grand Tetons in Jackson Hole, WY, virtually assures that the Fed will reduce interest rates next month. In a short 16-minute speech, Powell said the magic words. “The time has come for policy to adjust.

A Rollercoaster and the Carry Trade

As expected, the Federal Reserve kept its key rate, the fed funds rate, unchanged at 5.25 – 5.50%. After holding the fed funds rate steady for a year, Fed Chief Jay Powell twice-mentioned that a September rate cut is on the table at his press conference.

A September Rate Cut is on the Table, Softer Economic Data Raises Worries

As expected, the Federal Reserve kept its key rate, the fed funds rate, unchanged at 5.25 – 5.50%. After holding the fed funds rate steady for a year, Fed Chief Jay Powell twice-mentioned that a September rate cut is on the table at his press conference.