Several of the major stock indexes set record highs this past week as enthusiasm surrounding a soft-landing rose and the historically bad months of August and September are almost behind us. That said, expect some volatility as the Presidential Election approaches. As of now, we would be buyers of stock on weakness. It’s the yields that we would like to see move back up a bit before extending duration.
“It’s The Economy…”
The Bureau of Economic Analysis reported that Personal Income rose 0.2% during August (5.6% y/y), this after rising 0.3% in July. Disposable Personal Income (personal income less taxes) adjusted for inflation, rose 0.1% during August (3.1% y/y) after rising 0.1% in July. Personal Consumption Expenditures (PCE) which represents approximately 70% of economic activity rose 0.2% during August (5.2% y/y) after rising 0.5% during July. The PCE Chain Price Index, rose 0.1% in August after rising 0.2% in July (2.2% y/y). The y/y increase marks the lowest since February 2021. Excluding food and energy, the Core PCE rose 0.1% during August (2.7% y/y), after rising 0.2% during July. (Source, Bureau of Economic Analysis)
The University of Michigan reported that the Final September Reading of Consumer Sentiment rose to 70.1% from a preliminary September 69.0% and from a final August 67.9%. The final September expectations component edged up to 72.1% from 72.1 in August. Lastly, the final September current conditions component rose to 63.3 from 61.3 at the end of August. According to the Survey of Consumers Director, Joanne Hsu, “consumer sentiment extended its early-month climb, ultimately rising more than 3% above August. This increase was seen across all education groups and political affiliations.”
Second Quarter Gross Domestic Product (final revision), as reported by the Commerce Department, a tally of the output of all goods and services in the United States, rose at an annualized rate of 3.0%, unchanged from the prior revision, but double the 1.4% during Q1and as compared to 3.1% y/y. The PCE Price Index rose at an annualized rate (SAAR) of 2.5% during Q2, unrevised from the previous estimate and as compared to 3.4% during Q1. The PCE Price Index Excluding Food and Energy rose at an annualized rate of 2.8% during Q2, unrevised from the prior estimate, down from 3.7% during Q1. (Source, U.S. Bureau of Economic Analysis)
Initial Claims for Unemployment Benefits for the week ended September 21st fell 4,000 to 218,000 from 222,000 the prior week, which was revised 3,000 higher. The four-week rolling average fell 3,500 to 224,750 from 228,250 which was revised up by 750. Continuing claims for the week ending September 14th rose 13,000 to 1,834,000 from 1,821,000 the prior week, which was revised lower by 8,000. The continuing claims four-week average fell 6,500 to 1,835,750 from 1,842,250. (Source, U.S. Department of Labor)
The Census Bureau reported that Sales of New Homes fell 35,000 during August to a Seasonally Adjusted Annualized Rate (SAAR) of 716,000 from 751,000 during July (9.8% y/y). Sales of New Homes have fallen by 30.55% from their peak of 1.031 million in October 2020 and 44.01% from the peak in July 2005 of 1,279,000 units. According to Haver Analytics, “the median sales price of a new home fell 2.0% (-4.6% y/y) in August to $420,600 (NSA) after rising to $429,000 in July. The median sales price was 8.6% below its October 2022 peak of $460,300.” (Source, U.S. Census Bureau)
The Conference Board’s Consumer Confidence Index fell to 98.7 (-5.4% y/y) during September from 101.9 in July, revised from 105.6. The present situation index fell to 124.3 in September from 134.4 (-15.0% y/y) while the expectations component slipped to 81.7 during September from 86.3 during August (6.9% y/y). Those surveyed saying that jobs are “hard to get” edged up to 18.3% of respondents during September as compared to 16.8% in August while those claiming that jobs were “plentiful” fell to 30.9% from 32.7% over those same months. (Source, The Conference Board)
Worth a Click
· The U.S. Justice Department sued Visa (V), accusing the payment processor of having “unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” so said Attorney General Merrick Garland. The suit specifically addresses Visa’s more than 60% share of debit transactions in the United States. To that we say, “HELLO” what about the other 40%!
· Speaking at The Atlantic Festival, JP Morgan Chase (JPM) CEO Jamie Dimon that he was “a little more than skeptical than other people” regarding a soft landing for the U.S. economy. Dimon cited the “remilitarization of the world” along with onshoring and deglobalization as some of the reasons that inflation would remain sticky, hurt the change for the ever elusive soft landing.
· OpenAI, the creator of ChatGPT said it expects about $5 billion in losses on approximately $3.7 billion in revenue for 2024. The private company is considering becoming a public benefit corporation, whose shares are listed on an exchange like any other company. However, it also intends to benefit society. Analysts value the company at up to $150 billion.
Upcoming Economic Reports scheduled to be released this week include the following, on Tuesday, Institute for Supply Management Manufacturing Report and Construction Spending; on Thursday, the Weekly Report of Initial Claims for Unemployment, August Factory Orders and Institute for Supply Management Services Report; and, on Friday, September Non-Farm Payroll Report.
The Q3 Earnings Season is about to begin. The following is a partial list of reports that may impact market sentiment. These include – Carnival (CCL), Nike (NKE), Paychex (PAYX), Lamb Weston Holdings (LW), McCormick (MKC), Levi Strauss (LEVI), Conagra (CAG), and Constellation Brands (STZ).
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Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
