The Good Stuff

1. A real rate cut
The Fed trimmed policy rates at its September meeting. The implementation note shows the interest paid on reserves moved to 4.15% effective Sept 18. Translation: borrowing costs are easing at the margin, and the door is open to more data-dependent moves.

2. Markets finished August in the green
August closed positive across major U.S. indexes. The S&P 500 was up ~1.9% for the month and nearly 10% year-to-date at that point. The Dow also gained 3.2% in August.

3. Yields cooled a bit
The 10-year Treasury ended August around 4.23%, a notch lower than mid-month. If you’re eyeing a refi or laddering Treasuries/CDs, this matters.

4. Medicare Open Enrollment is almost here
Mark your calendar: Oct 15–Dec 7 is the annual window to review Advantage and Part D plans. If you or a parent use Medicare, this is the time to compare coverage and pharmacy networks.

5. Football is back
The NFL’s season opener and the league’s first-ever Dublin game pulled big audiences, which tends to boost travel and hospitality in host cities. Fun trivia for your next flight.

What’s New and Worth Watching

1. Government shutdown
A federal shutdown began Oct 1. Beyond the politics, the practical issue for markets is delayed data releases the Fed watches. The White House estimates a shutdown could shave about $15B of GDP per week if it drags on. We will keep an eye on timing for jobs and inflation reports.

2. Fed path from here
Chair Powell’s Jackson Hole remarks flagged rising risks to employment even as inflation cools. That balancing act is why the Fed just eased and why future moves will lean on incoming data.

3. Inflation check
August CPI ran 2.9% year over year with core at 3.1%. Cooler than last year, still above target, and consistent with a gradual-easing stance.

Planning Ideas for October

✔ Year-end retirement sweep: If you want to hit 401(k)/403(b) targets before Dec 31, you can raise your deferral rate now and use your brokerage cash to cover living expenses temporarily.

✔ Roth conversions: With a cut in place and markets near highs, partial conversions can still make sense if your 2025 bracket has room.

✔ Tax to-dos: Check Q4 estimated taxes, harvest gains or losses as needed, and review ESPP/RSU withholding ahead of bonuses.

✔ Cash and ladders: Lock in portions of cash at staggered maturities. If you are anticipating a mortgage refi, start collecting docs so you can move fast if rates dip.

✔ Medicare review: We can compare 2025 formularies and provider networks during Open Enrollment.

Portfolio Angle

✔ Stay diversified: August’s gains were broad, not just mega-cap tech. If you are concentrated, we can use rallies to trim toward targets without big tax bites.

✔ Bonds back in the conversation: With the 10-year hovering a bit above 4%, high-quality fixed income can pull its weight again for income and ballast.

✔ Opportunistic cash: Keep some dry powder for volatility around shutdown headlines and data timing.

So, what’s actually in this thing, and what could it mean for you and your finances? Let’s break it down.

The Good Stuff

1. Permanent Tax Cuts

The 2017 tax cuts are no longer temporary. Lower tax rates and a higher standard deduction are now permanent, at least until the next round of changes.

Why this matters: more take-home pay and fewer surprises come tax time.

2. Deductions for Tip & Overtime Income

If you earn tips or work a lot of overtime, you can now deduct up to $25,000 in tip income and $12,500 in overtime but only through 2028.

Heads up: these benefits phase out for higher earners.

3. Extra Deduction for Retirees

If you’re 65+ and in certain income brackets, you get an additional $6,000 deduction through 2028.

4. SALT Deduction Cap Increased

For folks in high-tax states, the $10,000 SALT cap has been temporarily bumped up to $40,000 but only if your income is under $500,000.

5. Small Business Incentives

If you own a business, you’ll want to pay attention to these:

✔️ 100% expensing for equipment and capital investments is now permanent
✔️ The qualified business income deduction gets a boost

Bottom line: if you’ve been considering expanding or upgrading, this could be a good time.

6. Child Tax Credit Gets a Small Bump

In 2025, the Child Tax Credit increases by $200, with future adjustments for inflation. Not huge, but it adds up.

7. New “Trump Accounts” for Kids

This is a new savings tool for kids born through 2028:

✔️ $1,000 government deposit to start
✔️ Up to $5,000/year in family contributions
✔️ Grows tax-deferred until age 18

The “One Big Bill” Part, What’s Supposed to Get Easier

One Federal Bill to Rule Them All

Starting in 2025 (in pilot form), you’ll start seeing a single federal bill for things like student loans, Medicare premiums, and IRS payments.

Why this could help:

✔️ One due date
✔️ Real-time tax estimates and repayment info
✔️ Less juggling, fewer missed payments

Simplified Billing for Healthcare & Loans

A new federal billing system will combine ACA, Medicare, and federal student loan bills in one place. It should (hopefully) reduce confusion and speed up things like income-driven repayment updates.

And Then There’s the stuff people may not like

Cuts to Medicaid and SNAP

Eligibility is tightening for both programs. Stricter work requirements mean fewer people may qualify.

Green Energy Tax Credits Are Shrinking

If you were planning on buying an EV or installing solar panels for the tax break, double-check the new rules, many credits are being reduced or eliminated.

Changes to Student Loan Repayment

Some income-driven repayment plans and subsidies may be going away. If you have student loans, this is definitely worth keeping an eye on.

Debt Ceiling Raised by $5 Trillion

What it means for you:

✔️ Possibly higher interest rates
✔️ Potential pressure on inflation
✔️ Could impact mortgages, loans, and investment performance

What This Means for Your Portfolio

Inflation & Rates

Tax cuts and more government spending could lead to inflation. I’m watching this closely.

Winners & Losers

Winners: manufacturing, construction, small business, defense

Losers: renewable energy, possibly some corners of healthcare

Planning Tip

This is a good time to review:

✔️ Your tax strategy
✔️ Investment allocation
✔️ Student loan plan
✔️ Estate or college savings strategy

Final Thoughts

The One Big Beautiful Bill Act is part tax reform, part simplification, part political Frankenstein. Some changes are permanent, some expire in 2028, and others may shift depending on who’s in charge after the next election cycle.

As always, I’m here to help you make sense of how these changes impact you directly. If you want to review your plan or talk through any of this in more detail, just reach out.

And seriously, don’t try to read the full bill without coffee.

Will it shake the markets? Probably not. But if attention-seeking were an asset class, it’d be up 40% YTD.

📈 May Market Recap: Stronger than most analysts expected

While headlines got weird, stocks had one of their best Mays in decades:

🟩 S&P 500: +6.15%

🟩 Nasdaq: +9.56%

🟩 Dow Jones: +3.94%

Investors were in a good mood thanks to:

✔️ Strong earnings from mega-cap tech
✔️ A little progress on trade deals
✔️ Soft inflation data
✔️ And everyone is ignoring a U.S. credit downgrade from Moody’s

🏘️ Housing Market: Hot and Cold

The housing market is still wearing two different shoes:

✔️ New home sales jumped nearly 11% in April, thanks to builders offering incentives and rate buydowns.

✔️ But existing home sales fell 0.5%, with year-over-year sales down 2%.

✔️ Why? High home prices and stubbornly high mortgage rates are keeping many buyers (and sellers) on the sidelines.

✔️ Median existing home price? $414,000.

In short: New homes are doing better, but the resale market is stuck in a weird “we’d sell, but where would we go?” loop.

🌍 World Markets Went Along for the Ride

Europe and Asia followed the U.S. rally:

🇩🇪 Germany: +6.67%

🇯🇵 Japan: +5.33%

🇲🇽 Mexico: +2.81%

🇨🇳 China: +5.29%

The global outlook is improving, and May marked the fifth straight positive month for international equities.

🔮 Coming Up in June: Apple + AI = ???

All eyes will be on Apple’s WWDC conference kicking off June 9. This annual developer event is basically Comic-Con for tech, and this year it’s expected to focus heavily on artificial intelligence.

✔️ Think Siri 2.0, smarter devices, and maybe a few stock-moving surprises.

✔️ It’s one of those events where one keynote line can shift billions.

📊 Quick Economic Hits

GDP: Slight dip (-0.2%) in Q1, but better than first estimated

Jobs: +177,000 in April, unemployment steady at 4.2%

Retail sales: Up 0.1% month over month

Durable goods: Down 6.3% in April, but better than expected

The Fed held rates steady and will meet again June 17–18. Don’t expect fireworks, but listen for hints.

🏕️ Just for Fun: Camping Stats You Didn’t Ask For

Did you know?

⛺️ $199/day is what the average camper spends

🐶 More people bring their dogs (53%) than their siblings (13%) camping

✨ 11% of campers go full glamp-mode

🧑‍💻 36% work while camping

💬 Quote of the Month

“If you don't like how things are, change it! You're not a tree.”
— Jim Rohn

Enjoy the start of summer—whether you're investing, camping, or just watching billionaires yell at each other online.

Markets Take Off

The S&P 500 (think SPY) jumped 11% yesterday, from $493 to $549 by close, our wallets are smiling! Why? President Trump hit pause on most tariffs for 90 days, dropping them to 10% (except China, now at 125%). After a bumpy week, this news sparked a buying spree, stocks soared and we’re feeling the buzz, but there’s likely more volatility ahead.

Tariffs: Good and Not-So-Good

This 90-day breather is a win and a chance for trade talks to cool things down. But China’s fighting back with big tariffs. Markets love a break, but we’re not out of the woods. More ups and downs could be coming.

Keep Your Eyes on the Prize

Yesterday was a blast, but long-term wins the race. The S&P’s climbed from $115 in 2003 to $549 now; dips happen, yet it keeps growing. Your investments are like a sturdy tree; shaky winds blow, but the roots hold strong. Hang tight; volatility might stick around, but we’ve got this!

Tax Tips: Sneaky Savings Before April 15!

Six days to shrink your 2024 taxes! Whether you’re a 1099 or W-2, these tricks, including a cool home hack, can stack your savings:

Augusta Rule: Rent your home, any of your homes, or space to your business for meetings, or even family gatherings, up to 14 days, tax-free! Set a fair price, jot it down, and cash in.

IRA: Pop $7,000 ($8,000 if 50+) in by Monday, tax break now, win later.

HSA: High-deductible plan? Stash $4,150 (solo) or $8,300 (family), health and tax perks.

Home Interest & Property Tax: Deduct mortgage interest (up to $750,000 debt) and property tax (max $10,000) if you itemize—home sweet deal!

1099 Gems:
✔️ Section 179: New biz gear? Deduct up to $1.16M, bam!
✔️ Oil & Gas: Well owner, deduct about 96% of the initial investment!
✔️ Pet Guard Dog: Fido guards your space? Deduct his treats/food!

W-2 Gems:
✔️ Uniform Costs: Job needs scrubs? Deduct upkeep (over 2% income)!
✔️ Tax Prep Fees: Paid to file? Claim it (over 2% income)!
✔️ Pool Rx: Doc-ordered pool? Deduct it (over 7.5% income) splash cash!

Taxes can feel like a puzzle, but we’re here to help you solve it! Contact us if you need help.

*Disclaimer: I’m not a Certified Public Accountant (CPA) and this isn’t tax advice. These tips are for informational purposes only—please consult a CPA or tax professional to see what works for you.

First, we heard that “Chinese Start-Up DeepSeek Threatens American Artificial Intelligence Dominance,” which sent tech stocks on a rollercoaster ride. Then came “Tariffs Could Impact Inflation,” shaking up U.S. stock prices and rattling financial markets worldwide. To put things in perspective, I’ve included a chart showing how markets have handled major geopolitical events over the past 30 years. (The original version goes back to 1900—starting with the San Francisco Earthquake and Fire in 1906!)

The takeaway? Big news events constantly test markets, but they also have a long history of resilience. So far, 2025 has thrown us a few surprises, and chances are, we’ll see more “shock” headlines before the year is out.

But here’s a simple way to think about your portfolio:

📊 Portfolio = Goals + (time horizon + risk tolerance)

Market swings are just part of the equation!

One of my favorite Warren Buffett quotes sums it up well:
“Be fearful when others are greedy and greedy when others are fearful.”

Right now, that mindset might be coming into play. While stock prices hit all-time highs in early February, individual investors were surprisingly bearish. The AAII Sentiment Survey dropped to 28.4 on February 12, the lowest reading since November 2023.

And who can blame them? Tariffs, inflation, interest rates, and global tensions create an overwhelming mix of concerns. But history shows that individual investors tend to get caught up in emotions, overconfidence, regret, and trend-chasing, while Wall Street stays focused on the bigger picture.

So, let’s take a deep breath, tune out the noise, and stay focused on what matters: your long-term goals!

February 2025 Market Recap: A Wild Ride with Some Bright Spots

Stocks had a bumpy February as inflation concerns, trade policy shifts, and mixed economic data kept investors on edge.

Market Moves

Tariff Talk Shakes Things Up: News of new tariffs on Mexico, Canada, and China sent stocks lower early in the month, but markets rebounded after delays were announced.

Fed Holds Its Ground: Fed Chair Jerome Powell reassured lawmakers that rate cuts aren’t an urgent priority, keeping investors guessing about future policy shifts.

S&P 500 Hits Another High: Despite the volatility, markets rallied after Presidents’ Day, with the S&P 500 notching its third record close of the year.

Earnings & Growth Concerns: A major retailer’s weak outlook fueled fears of an economic slowdown, while Atlanta Fed President Raphael Bostic hinted at early signs of a cooling labor market.

Sector Winners & Losers: Real estate, consumer staples, and utilities saw gains, while consumer discretionary and tech stocks took a hit.

Big Picture: What’s Next?

Looking ahead to March, investors are watching European markets, which have been outperforming the U.S. thanks to stronger earnings projections.

European stocks are on a tear, with Spain, Italy, and Germany leading the way.

China’s Hang Seng Index soared 13.75%, but Japan’s Nikkei took a hit.

Key Economic Indicators

GDP Growth: The economy expanded 2.3% in Q4, slightly slowing from 2023’s pace.

Job Market: Employers added 143,000 jobs, but wage growth accelerated.

Inflation Watch: Consumer prices rose 0.5% in January, higher than expected.

Housing Market: Housing starts and existing home sales dropped, pressured by higher mortgage rates.

The Fed’s Next Move: The next FOMC meeting in March will give investors more clarity on interest rates.

Bottom Line

February reminded investors that markets are always evolving, but long-term strategies remain key. While headlines may rattle stocks, resilience and patience tend to pay off. Buckle up, 2025 still has plenty of surprises ahead!

Stocks rallied in January on upbeat Q4 corporate reports and solid economic news that quieted talk of an inflationary comeback.

The Dow Jones Industrial Average led, tacking on 4.7 percent. The Standard & Poor’s 500 stock index picked up 2.7 percent while the Nasdaq Composite added 1.64 percent.¹

New Year’s Fears

After a tech-led relief rally kicked off the New Year, markets then fell as a round of fresh economic data stoked inflationary fears.²

Investors also reacted to news that most Federal Open Market Committee members seemed concerned that inflation risks had increased, according to the minutes of the Fed’s December meeting. Then, a warmer-than-expected December jobs report caused investors to question whether the Fed would adjust rates in 2025.³

Goldilocks Returns

However, stocks regained their momentum thanks to upbeat Q4 corporate reports and updated economic news that tamped down talk that inflation was a concern. The “Goldilocks” narrative—an economy that’s neither too hot nor too cold—made a comeback.⁴

The Producer Price Index report showed that wholesale prices rose less than expected in December. Then the December Consumer Price Index (CPI) report showed that core inflation (minus volatile energy and food prices) rose less than expected.^5,6

Inauguration Enthusiasm

Following Inauguration Day, stocks resumed their rally as investors believed that a pro-business administration would also be good for financial markets. Markets pushed higher as investors cheered a flurry of new policy announcements and executive orders.^7,8

Honeymoon Rally Slows

However, by the final week of the month, tech stocks dragged the markets lower on news that a Chinese start-up had developed a competitive artificial intelligence (AI) model that performed as well as its Western counterparts at a fraction of the cost. As the month came to a close, investors evaluated whether it was indeed a “black swan” event or just another development in the fast-moving world of AI.⁹

Sector Scorecard

All but one of the S&P 500 Index sectors gained over the month.¹⁰

Healthcare (+6.76 percent) and Financials (+6.50 percent) were neck and neck as the top-performing sectors, while Communication Services (+5.75 percent), Materials (+5.53 percent), and Industrials (+5.00 percent) were not far behind. Consumer Discretionary (+3.49 percent) and Utilities (+2.89 percent) also posted index-beating gains. The three other sectors to end the month in the green were Energy (+2.31 percent), Real Estate (+1.84 percent), and Consumer Staples (+1.63 percent); however, they all lagged the overall return of the S&P 500.¹⁰

The worst-performing sector was Technology (−0.74 percent).¹⁰

What Investors May Be Talking About in February

There is no Federal Open Market Committee (FOMC) meeting scheduled for February, so expect investors to watch economic reports closely as they try to discern the Fed’s thinking on inflation, tariffs, and the labor market.

Investors will also be paying close attention to the White House and its actions on both domestic and international fronts.

Much debate still swirls around the topic of tariffs and their impact on inflation. Market watchers remind investors that markets are a forward-looking mechanism, meaning they may have already priced some of the tariff news. However, in the month ahead, markets may continue to adjust as new policy positions are released.¹¹

World Markets

The MSCI-EAFE Index rose 5.21 percent, led by solid gains throughout Europe.¹²

Germany added 9.16 percent, while France (+7.72 percent), Spain (+6.67 percent), and Italy (+6.69 percent) all posted solid gains. The United Kingdom also had a strong month, picking up 6.13 percent.¹³

Elsewhere, Brazil (+4.87 percent) was a standout among emerging markets. On the Pacific Rim, Korea added 4.91 percent while Australia gained 4.57 percent. Notably, Japan’s Nikkei lagged, falling 0.81 percent.¹⁴

Indicators

Gross Domestic Product (GDP)

The economy grew at an annualized 2.3 percent in Q4, slightly below estimates. For the full year, GDP grew 2.5 percent, compared with 3.2 percent in 2023. Q4 marked the ninth of the past 10 quarters in which year-over-year GDP growth exceeded 2 percent.¹⁵

Employment

Employers added 256,000 jobs in December, topping economists’ expectations of 155,000 jobs. Unemployment ticked down to 4.1 percent, and wage growth moderated, rising just 0.3 percent in December—in line with expectations.¹⁶

Retail Sales

Consumer spending increased 0.4 percent in December, shy of economists' expectations of 0.6 percent. Year over year, retail sales rose 3.9 percent in December, a slight increase from November’s annualized gain.¹⁷

Industrial Production

Industrial output rose 0.9 percent in December, ahead of economists’ expectations. The increase was driven by aircraft and construction supplies manufacturing.¹⁸

Housing

Housing starts rose 15.8 percent in December over the prior month, the highest rate since February. The gain was driven by a 61.5 percent rise in multifamily starts, which includes apartment buildings and condos. A solid rise in single-family housing starts (+3.3 percent) also contributed to December’s advance. For the full year, total starts were down 3.9 percent.¹⁹

Existing homes sales rose 2.2 percent in December to 4.24 million homes. Total sales in 2024 slid 0.7 percent from 2023 to 4.06 million homes—a 30-year low. The median existing home sales price was $404,400, a 6.0 percent increase from a year earlier.^{20, 21}

New home sales rose 3.6 percent in December. Total annual sales in 2024 were 683,000 new homes, a 2.5 percent increase over 2023. The median new home sales price in December was $427,000. There were 494,000 unsold new homes on the market in December (representing 8.5 months of inventory), slightly higher than November and up 10 percent from a year earlier.²²

Consumer Price Index (CPI)

Consumer prices ticked up 0.4 percent in December, driven largely by higher gas prices. Year over year, CPI rose 2.9 percent. However, core CPI, which excludes volatile food and energy prices, was up 3.2 percent year over year—better than economists expected.²³

Durable Goods Orders

Orders of manufactured goods designed to last 3 years or longer fell 2.2 percent in December, mostly due to a decrease in transportation equipment orders.²⁴

The Fed

As widely expected, the Federal Reserve voted to hold firm on interest rates at its January meeting, marking a new wait-and-see phase in monetary policy. The Fed Funds Rate target range remains at 4.25-4.50 percent.²⁵

Fed Chair Jerome Powell had been signaling for some time that the Fed would be moving to a more neutral monetary policy stance, citing the need to balance inflation and a cooling labor market. “From here, it’s a new phase, and we’re going to be cautious about further cuts,” he said. Minutes released from the December FOMC meeting showed that some committee members were concerned about inflation risks.²⁶

The FOMC’s next meeting is scheduled for March 18-19.

1. WSJ.com, January 31, 2025

2. CNBC.com, January 3, 2025

3. CNBC.com, January 10, 2025

4. Advantage.FactSet.com, January 31, 2025

5. CNBC.com, January 14, 2025

6. WSJ.com, January 15, 2025

7. MarketWatch.com, January 21, 2025

8. CNBC.com, January 22, 2025

9. Investopedia.com, January 31, 2025

10. Sectorspdrs.com, January 31, 2025

11. Investopedia.com, January 31, 2025

12. MSCI.com, January 31, 2025

13. MSCI.com, January 31, 2025

14. MSCI.com, January 31, 2025

15. WSJ.com, January 30, 2025

16. WSJ.com, January 10, 2025

17. Reuters.com, January 16, 2025

18. KPMG.com, January 17, 2025

19. Eyehousing.org, January 17, 2025

20. WSJ.com, January 24, 2025

21. Realtor.com, January 24, 2025

22. Realtor.com, January 27, 2025

23. WSJ.com, January 15, 2025

24. Bankingjournal.aba.com, January 28, 2025

25. WSJ.com, January 29, 2025

26. CNBC.com, January 8, 2025

27. WalletHub.com, February 8, 2024

28. PRNewswire.com, February 8, 2024

29. Investopedia.com, September 19, 2024

Stocks notched solid gains in the first quarter as enthusiasm about artificial intelligence, signs of a soft landing, and dovish talk from the Fed buoyed investor confidence.

For the quarter, the Dow Jones Industrial Average rose 5.62 percent, the Standard & Poor’s 500 Index gained 10.16 percent, and the Nasdaq Composite picked up 9.11 percent.¹

Rocky Start in Q1

Stocks saw modest gains in January as positive economic data (retail sales, gross domestic product [GDP] report) and upbeat Q4 corporate reports helped offset a mixed inflation update. As expected, the Fed kept rates unchanged at its January meeting. The more neutral language used by the Fed led some to believe the Fed was concerned about inflation and might be slow to adjust rates. That news took the wind out of stocks’ sails, curtailing gains for the month.²

Building Momentum

In February, stocks regained some momentum as investor enthusiasm surrounding artificial intelligence overshadowed the Fed’s next move with interest rates. By mid-month, investors' attention shifted to any company offering an artificial intelligence update in its quarterly report.

Marching Onward

Mostly positive economic news in March—including strong but moderating GDP growth, steady unemployment, and decelerating inflation—propelled stocks. All three averages set record highs during the month.³

At its March meeting, the Fed left rates unchanged and signaled its inclination to cut interest rates three times this year—each time by a quarter of a percentage point. Markets rallied to new highs following the news, which led to the S&P having its best first-quarter performance in five years.⁴

Sector Scorecard

The Q1 rally was generally broad-based, with all but one major sector of the S&P 500 Index posting gains for the quarter. Energy (+12.57 percent) topped the pack of double-digit leaders that included the tech-heavy Communications Services sector (+12.37 percent), Financials (+12.02 percent), and Industrials (+10.50 percent)—all of which outperformed the overall index.

Materials (+8.59 percent), Health Care (+8.32 percent), Technology (+8.20 percent), Consumer Staples (+6.01 percent), Consumer Discretionary (+2.56 percent), and Utilities (+3.66 percent) also notched solid positive returns, further demonstrating how market leadership broadened beyond tech-related names over the quarter. Real Estate (-1.32 percent) was the sole sector to finish in the red.⁵

What Investors May Be Talking About in April

The Fed opens its two-day meeting on April 30, and investors can expect the Fed to look closely at the drivers of inflation. The Fed will examine each component of the Consumer Price Index, which measures the prices of consumer goods and services across more than 200 categories.⁶

In January, more than two-thirds of the CPI’s 3.1 percent was driven by the category called shelter, which includes rent prices. Shelter was sticky again in February and has been one of the most stubborn areas for some time.⁷

The Fed will be watching shelter and other key categories to see what’s driving inflation as it evaluates whether to adjust short-term rates at some point this year.

World Markets

The MSCI EAFE Index rose 5.06 percent during the first quarter on signs that the European Central Bank and others were considering cutting short-term rates. In fact, Switzerland’s Swiss National Bank cut its main policy rate in late March.⁸

In Europe, Spain (+9.63 percent), Italy (+14.49 percent), Germany (+10.39 percent), the United Kingdom (+2.83 percent), and France (+8.78 percent) all posted gains for the quarter.⁹

Pacific Rim markets also trended higher, with Japan (+20.63 percent) and Korea (+3.44 percent) leading.¹⁰

Indicators

Gross Domestic Product (GDP)

Led by consumer and government spending, the U.S. economy grew at a 3.4 percent annualized rate in the fourth quarter, revised up from the initial estimate. The GDP was higher than expectations but slower than the 4.9 percent expansion in the third quarter.¹¹

Employment

Employers created 275,000 jobs in February, besting expectations. The unemployment rate increased to 3.9 percent while average hourly earnings increased slightly less than expected.¹²

Retail Sales

Retail sales rose 0.6 percent in February, just short of expectations.¹³

Industrial Production

Industrial output edged up 0.1 percent in February following a 0.5 percent drop in January, as manufacturing appeared to recover from unseasonably cold winter weather.¹⁴

Housing

Single-family housing starts rebounded in February thanks to milder weather, climbing 11.6 percent. That compared with a drop in January.¹⁵

Sales of existing homes increased 9.5 percent in February to a seasonally adjusted annualized rate of 4.38 million units, the largest monthly gain in a year. Higher demand boosted the median sales price by 5.7 percent to $384,500, the eighth straight month of year-over-year increases.¹⁶

New home sales in February slipped 0.3 percent over the prior month but increased by 5.9 percent over February last year.¹⁷

Consumer Price Index (CPI)

Consumer prices rose 0.4 percent in February and were up 3.2 percent from a year ago—a bit hotter than economists expected but cooler than investors feared. Energy and shelter accounted for more than 60 percent of February’s gain, while two-thirds of January’s gain came from shelter.¹⁸

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer rebounded 1.4 percent in February, beating expectations.¹⁹

The Fed

The Fed left rates unchanged in the first quarter. After its January 31 meeting, the Federal Open Market Committee used more neutral language in its policy document and indicated a subtle shift from considering rate cuts to proposing they could be possible unless inflation became a concern. However, they cautioned that cuts weren’t automatic and would only consider them if inflation dangers had abated.²⁰

At the March meeting, the Committee also left rates unchanged but signaled its inclination to cut interest rates three times this year. That was a positive surprise for some investors who worried about the Fed’s commitment to adjusting rates.²¹

1. WSJ.com, March 31, 2024

2. WSJ.com, January 31, 2024

3. CNBC.com, March 28, 2024

4. CNBC.com, March 28, 2024

5. SectorSPDR.com, March 28, 2024

6. BureauofLaborStatistics.gov, 2024

7. CNBC.com, February 13, 2024

8. MSCI.com, March 31, 2024

9. MSCI.com, March 31, 2024

10. MSCI.com, March 31, 2024

11. CNBC.com, January 25, 2024

12. BureauofEconomicAnalysis.gov, March 28, 2024

13. CNBC.com, March 8, 2024

14. FederalReserve.gov, March 15, 2024

15. Reuters.com, March 19, 2024

16. CNBC.com, March 21, 2024

17. CNBC.com, March 25, 2024

18. CNBC.com, March 12, 2024

19. Reuters.com, March 26, 2024

20. WSJ.com, January 31, 2024

21. WSJ.com, March 20, 2024

Stocks notched solid gains last month as upbeat corporate reports and investor enthusiasm surrounding artificial intelligence overshadowed the Fed’s next move with interest rates.

The Dow Jones Industrial Average advanced by 2.22 percent, while the Standard & Poor’s 500 Index gained 5.17 percent. The Nasdaq Composite led, picking up by 6.12 percent.¹

No Hurry

Early in the month, Federal Chairman Powell stated that there was no hurry to change the Fed’s interest rate policy. In the past, talk of interest rates remaining “higher for longer” had the potential to cause market volatility. This time, however, investors looked past Powell’s update and turned their attention to Q4 corporate reports.²

The Influence of AI

By mid-month, earnings news dominated the headlines as investors focused on any company that offered an update on artificial intelligence. Investors’ obsession with AI reached a fever pitch when the leading maker of AI-friendly semiconductors released its Q4 update.³

Nvidia’s market cap rose by $277 billion on the upbeat news, pushing it to a valuation of $2 trillion. To put that into perspective, Nvidia’s market cap is now roughly the same size as Canada’s economy. Its 16 percent gain following the company’s earnings report was the largest one-day market cap increase experienced by any U.S. company.³

Remember that the companies mentioned are discussed for illustrative purposes only. This should not be considered a solicitation for the purchase or sale of any company.

Q4 Corporate Updates

Corporate reports helped the market’s month-long rally. At last check, 73 percent of Standard & Poor’s 500 companies had reported actual Q4 earnings per share above estimated earnings per share. Wall Street saw this as an encouraging sign, leading to the fourth straight monthly gain in major averages.⁴

Shift in Leadership?

Since the current rally began in October 2023, mega-cap technology stocks have led the way. However, there are signs that leadership may be broadening out. Last month, the consumer discretionary sector posted the largest gain, while the tech sector finished in the middle of the pack.⁵

Sector Scorecard

Returns for all major sectors of the S&P 500 Index were in the green for the month. In an about-face from January, Industrials (+7.18 percent) and Consumer Discretionary (+7.89 percent) led, along with Materials (+6.51 percent). Technology (+4.70 percent) and Communications Services (+4.59 percent) were among the most modest gainers for the month, with Consumer Staples (+2.10 percent) and Utilities (+1.06 percent) finishing last but still in the positive.⁶

What Investors May Be Talking About in March

Investor attention is expected to turn to the Fed’s two-day meeting, which ends on March 20th.

Back in December 2023, the Fed indicated that as many as three rate cuts were possible this year. However, during his recent February update, Federal Chairman Powell somewhat damped enthusiasm by stating that the Fed is continuing to look for further evidence that inflation is heading toward its 2 percent target.

January’s 2024 inflation reports came in a bit hotter than expected, seeming to support Powell’s position. The Fed may be reluctant to adjust rates if inflation stubbornly remains above the Fed’s target.⁷

Prior to the Fed’s meeting, February’s update on consumer prices will be released on March 12. Market watchers will be looking for clues in the report to anticipate the Fed’s next move.

World Markets

The MSCI EAFE Index rose 1.68 percent in February as a powerful move in Japan’s Nikkei 225 Index helped pace gains.⁸

In Europe, stocks were mixed. Italy picked up 5.97 percent and Germany tacked on 4.58. Meanwhile France and Spain posted losses for the month.⁹

The Pacific Rim markets were higher, paced by solid gains in China’s Hang Seng index as well as Korea and Japan.

With the help of positive corporate earnings and governance reforms, Japan’s Nikkei Index broke through its “iron ceiling”—the previous record high level set in 1989. It had become a notoriously significant psychological barrier over the past 3½ decades of economic stagnation. Japan has gained 17 percent year-to-date.^10,11

Indicators

Gross Domestic Product (GDP)

The U.S. economy grew by a revised annualized rate of 3.2 percent in Q4 2023, slightly down from the initial estimate of 3.3 percent, mainly due to downgraded inventory investment. Consumer spending and government investment were revised upward, however.¹²

Employment

Employers added 353,000 jobs in January, nearly double the 185,000 jobs expected. January’s increase was higher than December’s revised job gains of 333,000. The unemployment rate remained at 3.7 percent for the second month in a row, while average hourly earnings increased by 0.6 percent—double the estimate for January.¹³

Retail Sales

Consumer spending fell by 0.8 percent in January, worse than the anticipated 0.3 percent decline in sales. This number contrasts with December’s 0.6 percent rise (a positive surprise), which came off a robust holiday shopping season. Year over year, retail sales declined by 0.2 percent.¹⁴

Industrial Production

Industrial output fell by 0.1 percent in January, adversely impacted by cold weather across the country. Economists expected a 0.2 percent increase.¹⁵

Housing

Housing starts fell 14.8 percent in January due to cold weather.¹⁶

Existing home sales rose by 3.1 percent in January, benefiting from a slight tick down in mortgage rates in November and December. The median sales price was up by 5.1 percent year over year.¹⁷

Consumer Price Index (CPI)

Consumer prices rose by 0.3 percent in January and were up by 3.1 percent for the 12 months. This was cooler than December’s year-over-year gain of 3.4 percent but warmer than the 2.9 percent gain expected by economists. Core prices, which exclude food and energy, increased by 0.4 percent in January, up by 3.9 percent year over year.¹⁸

Durable Goods Orders

Orders of manufactured goods designed to last three years or longer fell 6.1 percent in January. Orders were flat in December.¹⁹

The Fed

While there were no FOMC meetings in February, markets digested comments from the Federal Reserve’s two-day meeting that ended on January 31.

The Fed’s policy language, which was released after the meeting, indicated a subtle shift from considering rate cuts to proposing that such cuts could be possible unless inflation becomes a concern. The Fed’s funds rate remains within the 5.25–5.50 percent target range.²⁰

1. WSJ.com, February 29, 2024

2. Reuters.om, February 4, 2024

3. MarketWatch.com, February 22, 2024

4. Advantage.Factset.com, February 29, 2024

5. MarketWatch.com, February 29, 2024

6. SectorSPDR.com, February 29, 2024

7. WSJ.com, February 13, 2024

8. MSCI.com, February 29, 2024

9. MSCI.com,February 29, 2024

10. MSCI.com, February 29, 2024

11. CNBC.com, February 22, 2024

12. Reuters.com, February 28, 2024

13. CNBC.com, February 2, 2024

14. WSJ.com, February 16, 2024

15. WSJ.com, February 16, 2024

16. Census.gov, February 16, 2024

17. CNBC.com, February 22, 2024

18. CNBC.com, February 12, 2024

19. Reuters.com, February 26, 2024

20. CNBC.com, February 21, 2024

Stocks saw modest gains last month as positive economic data and upbeat Q4 corporate reports helped support prices.¹

The Dow Jones Industrial Average advanced 1.22 percent, while the Standard & Poor's (S&P) 500 Index gained 1.59 percent. The Nasdaq Composite, which led throughout 2023, rose 1.02 percent.

Bumpy Start

It was not a straight line for stocks in January. As the month began, investors took a breath during the end-of-year rally to question the Federal Reserve’s next move on interest rates.

Goldilocks

By mid-month, there was plenty of news to suggest a "Goldilocks" economy was taking shape indicating economic growth that was neither too "hot" nor too "cold."

Many of the headlines were upside surprises. Unexpected news on the jobs market was followed by December retail sales, which came in better than expected. The December inflation report was mixed, while the Q4 report on gross domestic product (GDP) topped economists’ expectations.^2,3,4,5

Mixed Signals from the Fed

As expected, the Fed kept rates unchanged at its Federal Open Market Committee meeting, which concluded on January 31. In its summary report, some investors heard more neutral language that gave the Fed increased flexibility to cut rates in the coming months. Others, however, believe this would be the case only if the Fed believes the danger of inflation has decreased. The news took the wind out of stocks’ sails, modestly curtailing gains for the month.⁶

Sector Scorecard

Five of the 11 major sectors of the S&P 500 Index posted gains last month. Communications Services (+4.43 percent) was the clear leader, with Financials (+3.09 percent), Health Care (+2.93 percent), and Technology (+2.70 percent) performing well above the overall index’s return. Consumer Staples (+1.24 percent) also gained in January. Real Estate (-4.82 percent), Consumer Discretionary (-4.41 percent), Materials (-3.89 percent), Utilities (-2.97 percent), Industrials (-0.96 percent), and Energy (-0.51 percent) all declined over the month.⁷

What Investors May Be Talking About in February

At its December 2023 and January 2024 meetings, the Federal Reserve made it clear that it is now leaning away from rate hikes and toward rate cuts as it attempts to steer the economy to a soft landing this year. Therefore, in the month ahead, investors are expected to focus on two factors that may influence stock prices.

The first will be any signs of tailwinds in company fundamentals as the earnings season continues to unfold. The second will be any indication of a pickup in market volatility, which can happen as the economy transitions from a monetary tightening to a lower interest rate environment.

Fed officials are expected to make multiple appearances in February, which may indicate how members are seeing inflation and the outlook for rates. The next two-day Fed meeting will not be until mid-March.⁸

World Markets

The Morgan Stanley Capital International (MSCI) EAFE Index rose 0.54 percent in January—a modest rally that trailed the tech-driven gains in the U.S.⁹

European stocks were mixed. France picked up 1.51 percent, and Germany rose 0.91 percent. However, the United Kingdom fell 1.33 percent while Spain slipped 0.24 percent.¹⁰

A similar pattern was evident in the Pacific Rim markets. Japan’s Nikkei index (+8.43 percent) and Australia’s ASX 200 (+1.18 percent) notched gains, while China’s Hang Seng Index (-9.16 percent) and Korea’s KOSPI (-5.96 percent) lost ground.¹¹

Indicators

Gross Domestic Product (GDP)

The U.S. economy grew by a 3.3 percent annualized rate in Q4, thanks to consumer and government spending. Economists expected 2.0 percent growth. GDP for all of 2023 grew at a better-than-expected 2.5 percent annualized rate, compared with 1.9 percent in 2022.¹²

Employment

Employers added 216,000 jobs in December, ahead of the 170,000 expected by economists. December’s increase was above November’s and October’s revised job gains of 173,000 and 105,000, respectively. The unemployment rate remained at 3.7 percent, while average hourly earnings rose by 0.4 percent.¹³

Retail Sales

Consumer spending rose 0.6 percent in December, exceeding expectations of a 0.4 percent bump.¹⁴

Industrial Production

Industrial output edged up 0.1 percent in December—the first increase in four months—compared with a 0.6 percent drop in November and a 0.4 percent revised decline in October.¹⁵

Housing

Housing starts fell 4.3 percent in December, which was likely due to rainy weather. Starts declined 9.0 percent for all of 2023.¹⁶

Existing home sales fell 1.0 percent in December, compared with November. December sales were down 6.2 percent from the same month in 2022—the lowest level since August 2010. Full-year sales for 2023 were the lowest since 1995. The year-over-year gain in the median sales price was 4.4 percent.¹⁷

Month-over-month new home sales increased 8.0 percent in December and were higher by 4.4 percent compared to a year ago.¹⁸

Consumer Price Index (CPI)

Consumer prices rose 0.3 percent in December over the previous month and 3.4 percent compared with a year prior. This was higher than the 3.2 percent increase economists expected. Core prices, which exclude food and energy, rose 3.9 percent year over year.¹⁹

Durable Goods Orders

Orders of manufactured goods (designed to last three years or longer) were virtually unchanged in December—up $0.1 billion following a 5.5 percent increase in November.²⁰

The Fed

The Federal Open Market Committee left rates unchanged at its January 2024 meeting. The Fed used more neutral language in their policy document, giving them more flexibility to cut rates in the coming months.

However, the Fed qualified this by saying that cuts were not automatic and that it would consider them only if inflation dangers abated. Financial markets were somewhat unsettled by the Fed’s updated language.²¹

1. WSJ.com, January 31, 2024

2. MarketWatch.com, January 17, 2024

3. CNBC.com, January 18, 2024

4. WSJ.com, January 18, 2024

5. CNBC.com, January 25, 2024

6. WSJ.com, January 31, 2024

7. SectorSPDR.com, January 31, 2024

8. StLouisFed.org, 2024

9. MSCI.com, January 31, 2024

10. MSCI.com, January 31, 2024

11. MSCI.com, January 31, 2024

12. CNBC.com, January 25, 2024

13. CNBC.com, January 5, 2024

14. CNBC.com, January 17, 2024

15. Statista.com, January 26, 2024

16. Reuters.com, January 18, 2024

17. CNBC.com, January 19, 2024

18. NationalAssociationofHomeBuilders.org, January 25, 2024

19. WSJ.com, January 11, 2024

20. Census.gov, January 25, 2024

21. WSJ.com, January 31, 2024

Stocks moved higher in the final three months of the year as bond yields trended lower in growing anticipation of a potential Fed easing.

For the three months ending on December 31, the Dow Jones Industrial Average gained 12.5 percent while the Standard & Poor’s 500 Index picked up more than 11 percent. The Nasdaq Composite, which led throughout 2023, led again, tacking on nearly 14 percent.¹

A Shaky Start

As satisfying as the fourth quarter’s results were, the quarter began in an unpromising fashion.

Strong economic data released in October stoked investors’ fears that the Fed would be unable to ease its tight monetary policies, sending bond yields to heights not seen in more than a decade. Concerns over Treasury funding and higher-than-expected consumer price inflation added to the gloom that gripped stocks during the first month of the fourth quarter.

November Turning Point

But markets turned in November, rallying on fresh data that showed renewed inflation progress and constructive comments from Fed Chair Jerome Powell. These positive developments sparked a retreat in bond yields and a celebration in the stock market.

In a month’s time, pessimism over conditions potentially holding back the Fed from easing its restrictive policies faded, replaced by optimism that the rate hike cycle may be finished and interest rate cuts may be in the offing in 2024.

Encouraging Earnings

Throughout the first two months, companies were reporting their third-quarter earnings. Coming into the quarter, investors had hoped that good earnings reports might serve as a catalyst to lift stocks from the doldrums of the previous months. Corporate earnings, it turns out, were not spectacular, but they offered signs of encouragement to investors.

For the third quarter, earnings grew 2.7 percent year-over-year, which was the second straight quarter of earnings growth—a welcome development after suffering an “earnings recession” (i.e., two consecutive quarters of earnings declines) previous to this. Wall Street analysts are forecasting an 11.8 percent increase in corporate profits in 2024, despite concerns about a potential recession in 2024.²

Powell’s Pivot

The momentum continued to build in December when the Federal Open Market Committee (FOMC) announced that it was leaving interest rates unchanged, and a survey of its members indicated that up to three interest rate cuts would be possible sometime in 2024. The announcement, coupled with dovish post-meeting comments from Powell, helped drive bond yields sharply lower and stocks higher.

Q4 Sector Scorecard

For the quarter, all industry sectors except Energy (−7.25 percent) ended higher, including Communications Services (+10.81 percent), Consumer Discretionary (+11.08 percent), Consumer Staples (+4.68 percent), Financials (+13.36 percent), Healthcare (+5.93 percent), Industrials (+12.44 percent), Materials (+8.90 percent), Real Estate (+17.58 percent), Technology (+17.42 percent), and Utilities (+7.47 percent).³

What Investors May Be Talking About in January

One of the catalysts of last year’s market rally was excitement about the rise of artificial intelligence and its possible image on corporate earnings.

Though tech companies may be the first to benefit from AI adoption, the broader promise lies in what it can do for workers and non-tech companies. Much like electricity and computers, AI is beneficial to more than just utility companies and computer manufacturers.

Investors may pay close attention to how non-technology companies invest in AI as 2024 progresses. Companies making commitments might signal to investors that they have potential productivity advances and future competitiveness. The risk for investors is that the hype races ahead of the reality, and the enthusiasm fades.

World Markets

The MSCI-EAFE gained 10.10 percent in the fourth quarter thanks to falling inflation, lower yields, and a weakening U.S. dollar.⁴

Sharp declines in European inflation fed optimism of rate cuts, sending European stocks higher for the quarter, with advances in France (+5.61 percent), Germany (+8.87 percent), Italy (+7.47 percent), and Spain (+7.15 percent). The U.K., which lagged for most of the year, gained 1.65 percent.⁵

Pacific Rim markets were mostly higher for Q4. Australia picked up 7.69 percent, while Japan added 5.04 percent. The Hang Seng Index trailed with a drop of 4.28 percent, owing to Moody’s downgrade of China’s debt and new government restrictions on gaming.⁶

Indicators

Gross Domestic Product (GDP)

Q3 economic growth was revised lower, from a 5.2 percent annualized pace to 4.9 percent, primarily due to a downward revision of consumer spending.⁷

Employment

Employers added 199,000 jobs in November, which was lifted by the return of 30,000 striking auto workers. The number was slightly above the consensus estimate of 190,000. The unemployment rate dropped to 3.7 percent, while wage growth (+0.4 percent month-over-month) was in line with expectations.⁸

Retail Sales

Retail sales rose 0.3 percent in November, up from a revised −0.2 percent in October. Excluding auto and gasoline sales, retail sales climbed 0.6 percent.⁹

Industrial Production

Industrial production rose by 0.2 percent, aided by increased manufacturing. Year-over-year, industrial production was lower by 0.4 percent.¹⁰

Housing

Housing starts topped Wall Street expectations, as new housing construction rose 14.8 percent in November.¹¹

Sales of existing homes rose 0.8 percent in November—the first increase since May. Year-over-year sales fell 7.3 percent, the smallest drop since April 2022.¹²

New home sales dropped 12.2 percent in November, though they were 1.4 percent above last November.¹³

Consumer Price Index (CPI)

Consumer prices rose 0.1 percent in November and 3.1 percent from a year ago. Core inflation, which excludes energy and food, increased 0.3 percent month-over-month and 4.0 percent from last November. These numbers remained above the Fed’s 2.0 percent target.¹⁴

Durable Goods Orders

Durable goods orders rose 5.2 percent in November, the largest gain since July 2020. This gain was more than double the consensus estimate of 2.0 percent.¹⁵

The Fed

The FOMC elected to leave interest rates unchanged at both its October/November and December meetings.

Following its December meeting, the Fed signaled that it may cut interest rates three times in 2024. While careful not to declare a victory in its inflation battle, the Fed acknowledged that inflationary pressures have eased.¹⁶

1. WSJ.com, December 31, 2023

2. Advantage.Factset.com, December 8, 2023

3. SectorSPDR.com, December 31, 2023

4. MSCI.com, December 31, 2023

5. MSCI.com, December 31, 2023

6. MSCI.com, December 31, 2023

7. BEA.gov, December 21, 2023

8. CNBC.com, December 12, 2023

9. WSJ.com, December 14, 2023

10. FederalReserve.gov, December 15, 2023

11. MarketWatch.com, December 19, 2023

12. Realtor.com, December 20, 2023

13. Census.gov, December 22, 2023

14. CNBC.com, December 12, 2023

15. Morningstar.com, December 22, 2023

16. WSJ.com, December 13, 2023

Stock prices surged last month as positive inflation data and falling bond yields emboldened investors.

The Dow Jones Industrial Average gained 8.77 percent, while the Standard & Poor’s 500 Index advanced 8.92 percent. The Nasdaq Composite, which has led all year, picked up 10.70 percent.¹

Inflation Eases, Bond Yields Fall

The fears that have dragged on the stock market since August evaporated in November, as fresh inflation data reaffirmed continuing progress in the fight against rising prices.

The good news on the inflation front, coupled with upbeat comments by Fed officials, helped drive bond yields lower. Additionally, the bond market was relieved following news that a 20-year Treasury Note auction was well received.

CPI Report Sparks Rally

When October’s Consumer Price Index (CPI) report was released mid-month, showing prices flat from the previous month and a cooler-than-forecasted core CPI (excludes food and energy), stocks surged, with the S&P 500 index rising 2.9 percent. The yield on the 10-year Treasury dropped 19 basis points—a huge one-day move.²

Rate-Hike Cycle Ending?

The combination of decelerating inflation, constructive economic data, and generally benign commentary from Fed officials over the course of the month generated an increasingly optimistic outlook that the Fed’s rate-hike cycle may be at its end, and the prospect of a rate cut sometime in the first half of 2024.

Solid Corporate Reports But Cautious Outlooks

Corporate earnings were also a key focal point in last month’s stock market actions. With 94 percent of S&P 500 companies reporting, 82 percent reported a positive earnings surprise, while 62 percent reported a positive revenue surprise. On a more cautionary note, 64 S&P 500 companies issued negative earnings guidance for the fourth quarter, while 32 issued positive guidance.³

Sector Scorecard

For the month, all industry sectors, except Energy (–0.72 percent), ended higher, including Communications Services (+7.80 percent), Consumer Discretionary (+10.97 percent), Consumer Staples (+4.13 percent), Financials (+10.94 percent) Health Care (+5.4 percent), Industrials (+8.83 percent), Materials (+8.35 percent), Real Estate (+12.48 percent), Technology (+12.90 percent), and Utilities (+5.14 percent).⁴

With powerful gains already registered for the month, investors took a breather in the final week of trading to digest November’s exceptional gains.

What Investors May Be Talking About in December

Investors’ attention is expected to shift to the two-day Federal Open Market Committee (FOMC) meeting, which ends on December 13.

The focus may be less on the actual rate decision—since the markets expect the Fed to maintain the federal funds rate at its current level. Instead, investors may pay close attention to the wording of the FOMC statement announcing the decision and, most especially, to Fed Chair Powell’s remarks in the press conference that will follow the meeting.

Following the November meeting, Powell said that the Fed was not convinced that the inflation battle had been won and that additional progress toward its two percent inflation goal may require further restrictive monetary actions. The news unsettled investors, who had hoped that the rate hike cycle had come to an end.

While Powell is unlikely to change the substance of his message, investors will be looking for any indication that his stance has shifted.

World Markets

The MSCI-EAFE Index gained 9.09 percent in November on moderate inflation and hopes of interest rate cuts.⁵

European stocks performed strongly, with advances experienced in France (+6.17 percent), Germany (+9.49 percent), Italy (+7.19 percent), and Spain (+11.54). The U.K. lagged a bit, picking up only 1.80 percent.⁶

Pacific Rim markets also saw solid gains, with Japan rising 8.52 percent. Hong Kong was the performance outlier, falling 1.65 percent as China continued to struggle.⁷

Indicators

Gross Domestic Product (GDP)

The second estimate of economic growth in the third quarter was revised higher, from 4.9 percent to 5.2 percent.⁸

Employment

Employers added 150,000 jobs in October, below September’s pace of a 297,000-job gain and the consensus forecast of 170,000 new jobs. The unemployment rate ticked higher to 3.9 percent, while average hourly earnings came in around expectations.⁹

Retail Sales

Consumer spending declined 0.1 percent in October, coming off a 0.9 percent increase in September. This was the first decline in retail sales since March. Year over year, retail sales rose 2.5 percent, below the level of price increases for that period.¹⁰

Industrial Production

Industrial output fell 0.6 percent, owing in large part to the strike by automotive workers. The decline was greater than the 0.4 percent that economists had been expecting.¹¹

Housing

Housing starts rose 1.9 percent in October as builders took advantage of the ongoing shortage of existing homes’ resale inventory.¹²

Sales of existing homes declined by 4.1 percent month over month to a 13-year low, while sales from a year ago were down by 14.6 percent. The year-over-year gain in the median sales price was 3.4 percent due to the low inventory of homes on the market.¹³

New home sales fell 5.6 percent in October, though they were higher from a year ago by 17.7 percent.¹⁴

Consumer Price Index (CPI)

Consumer prices were flat in October and were higher by 3.2 percent from a year ago. Both numbers came in below Wall Street expectations. Core CPI, which excludes food and energy, also posted below-forecast results, rising 0.2 percent in October and 4.0 percent year over year. The annual Core CPI increase was the lowest in two years.¹⁵

Durable Goods Orders

Orders of goods designed to last three years or longer slumped 5.4 percent in October, led by a sharp decline in aircraft and automobile orders.¹⁶

The Fed

The FOMC elected to leave rates unchanged for the second consecutive meeting. The committee’s accompanying statement pointed to an improved assessment of the economy.

In his post-announcement press conference, Fed Chair Jerome Powell said that bringing inflation to the Fed’s two percent target was a long process, leaving open the possibility of a rate hike in December.¹⁷

1. WSJ.com, November 30, 2023

2. Finance.Yahoo.com, November 14, 2023

3. Advantage.FactSet.com, November 17, 2023

4. SectorSPDR.com, November 30, 2023

5. MSCI.com, November 30, 2023

6. MSCI.com, November 30, 2023

7. MSCI.com, November 30, 2023

8. CNBC.com, November 29, 2023

9. CNBC.com, November 3, 2023

10. WSJ.com, November 15, 2023

11. MarketWatch.com, November 16, 2023

12. MarketWatch.com, November 17, 2023

13. CNBC.com, November 21, 2023

14. Reuters.com, November 27, 2023

15. CNBC.com, November 14, 2023

16. MarketWatch.com, November 22, 2023

17. CNBC.com, November 1, 2023

Rising bond yields, geopolitical tensions, sticky inflation, and mixed earnings reports combined to push stocks lower last month.

The Dow Jones Industrial Average fell 1.36 percent while the Standard & Poor’s 500 Index surrendered 2.20 percent. The Nasdaq Composite dropped 2.78 percent.¹

Rising Bond Yields

Of the multiple headwinds that stocks battled last month, no two were stronger than rising bond yields and a fear of higher yields to come. Strong economic data throughout the month heightened fears that the Fed may raise rates further to cool the economy.

Inflation Updates

The inflation data last month didn’t help investor sentiment. Wholesale and consumer prices rose more than expected, which added to investor worry. The 10-year Treasury bond yield broke above 5.0 percent for the first time since 2007 and hovered near its 15-year high for the remainder of the month.²

No Relief from Earnings

After a difficult September, investors were eyeing the third-quarter earnings season to help lift a sluggish stock market. However, it didn’t happen as earnings proved mixed.

Through October 27, with 49 percent of the companies in the Standard & Poor’s 500 index reporting, 78 percent reported a positive earnings surprise.³

However, investors were disappointed by the decline in year-over-year net profit margins and discouraged by the forward guidance provided by reporting companies. The cautious guidance was largely attributed to current uncertainties, notably the potential widening of hostilities in the Middle East.⁴

A two-day rally at the month end was welcomed but unable to erase the month’s losses.

Sector Scorecard

Most industry sectors ended lower in October, including Communications Services (-1.30 percent), Consumer Discretionary (-5.52 percent), Consumer Staples (-1.38 percent), Energy (-5.75 percent), Financials (-2.44 percent) Health Care (-3.26 percent), Industrials (-2.98 percent), Materials (-3.17 percent), and Real Estate (-2.85 percent). The only sectors with a gain in October were Technology (+0.05 percent) and Utilities (+1.29 percent).⁵

What Investors May Be Talking About in December

As we move into the holiday shopping season, investors may be looking for early indications of just how strong the consumer is by gauging holiday shopping levels.

But what may cloud the holiday spending analysis is the growing trend of consumers beginning their holiday shopping in October or earlier to spread out the cost.

Holiday Shopping Trends

According to the National Retail Federation, 39 percent of consumers will begin their holiday shopping in November and nine percent will commence shopping in December. The others start their holiday shopping in October or earlier. However, Black Friday and Cyber Monday remain very strong days for holiday purchases.⁶

Keep these shopping trends in mind when you see consumer spending reports during the holiday season.

World Markets

The MSCI-EAFE Index fell 4.10 percent in October amid weak economic data in Europe and China with interest rate uncertainty contributing to the selling pressure.⁷

European stocks retreated, with declines experienced in France (-3.50 percent), Germany (-3.75 percent), Italy (-1.78 percent), Spain (-4.36 percent), and the U.K. (-3.76 percent).⁸

Pacific Rim markets also fell, with China’s Hang Seng index dropping 3.91 percent. Elsewhere, Australia lost 3.80 percent and Japan declined 3.14 percent.⁹

Indicators

Gross Domestic Product (GDP)

The U.S. economy grew by a 4.9 percent annualized rate in the third quarter, more than double the 2.1 percent expansion in the second quarter. Third-quarter growth was led by strong consumer spending and a rise in inventories.¹⁰

Employment

Nonfarm payrolls rose by 336,000 in September, exceeding the consensus forecast of a 170,000 increase. The previous two months’ reports were also revised higher by a combined 119,000. Wage growth came in at a modest 0.2 percent for the month and 4.2 percent year-over-year. The unemployment rate was 3.8 percent.¹¹

Retail Sales

Retail sales increased 0.7 percent in September, exceeding the consensus forecast of 0.3 percent. Most categories were higher, except for electronics/appliances and clothing retailers, both of which decreased 0.8 percent month-over-month.¹²

Industrial Production

Industrial output rose 0.3 percent, beating expectations of a 0.1 percent increase.¹³

Housing

Housing starts were 7.0 percent higher versus August, though lower by 7.2 percent from September 2022.¹⁴

Existing homes sales fell 2.0 percent from August and 15.4 percent from last September, as higher mortgage rates affected affordability.¹⁵

New home sales gained 12.3 percent in September versus the previous month and up 34 percent from a year ago. The median price of new sales, however, declined from $433,100 in August to $418,800.¹⁶

Consumer Price Index (CPI)

The price of consumer goods rose 0.4 percent in September and 3.7 percent from 12-months ago. Both were above forecasts, though core inflation at 0.3 percent in September and 4.1 percent year-over-year met consensus estimates.¹⁷

Durable Goods Orders

Durable goods orders climbed 4.7 percent in September, far outpacing the 2.0 percent increase forecasted by economists and the 0.1 percent gain in August.¹⁸

The Fed

After keeping rates unchanged at the September Federal Open Market Committee meeting, the minutes revealed that Fed officials were divided over whether interest rates needed to be hiked further.

Though a majority of voting members indicated that it may be appropriate to raise the federal funds rate again, the October rise in bond yields may obviate the need for it. The minutes also pointed to a potential change in future communications, from how high to increase rates to how long to keep rates at restrictive levels.¹⁹

1. WSJ.com, October 31, 2023

2. APNews.com, October 23, 2023

3. FactSet.com, October 27, 2023

4. FactSet.com, October 27, 2023

5. SectorSPDR.com, October 31, 2023

6. NRF.com, October 5, 2023

7. MSCI.com, October 31, 2023

8. MSCI.com, October 31, 2023

9. MSCI.com, October 31, 2023

10. CNBC.com, October 26, 2023

11. CNBC.com, October 6, 2023

12. CNBC.com, October 17, 2023

13. CNBC.com, October 17, 2023

14. CNN.com, October 18, 2023

15. WSJ.com, October 19, 2023

16. Morningstar.com, October 25, 2023

17. CNBC.com, October 12, 2023

18. CNBC.com, October 26, 2023

19. WSJ.com, October 11, 2023

Stocks lost a portion of their first-half gains in the third quarter as a continued tight monetary bias from the Federal Reserve sent bond yields higher, unsettling stock investors throughout August and September.

For the three months ending September 30, the Dow Jones Industrial Average declined 2.62 percent, while the Standard & Poor’s 500 Index lost 3.65 percent. The Nasdaq Composite fell 4.12 percent.¹

A July Rally Faded

The strong price momentum during the first half of the year continued into the start of the third quarter as stocks rose in July. Cooling inflation, a better-than-anticipated kick-off to second-quarter earnings reports, and a growing belief that the U.S. economy may avoid falling into a recession helped fuel the gains.

However, in August, sentiment turned. Multiple headwinds—including rising bond yields, credit rating downgrades (both U.S. government debt and corporate debt), and continued economic weakness in China—dampened enthusiasm. A late-month rally trimmed losses, although it wasn't enough to keep August from ending in the red.

Headwinds in August

August’s stock slide continued into September. An early-month rally faded, beginning with the start of a labor strike at the major automakers and a drop in consumer confidence. Rising oil prices further darkened investor mood as it fueled fears that the Fed might need to raise rates again to combat inflation caused by higher energy prices.

Earnings Outlook Brightens

The second-quarter earnings season, which largely ended in August, helped support stocks with better-than-expected results. As of August 25th, with 485 of the companies in the S&P 500 reporting, 79 percent posted earnings above market estimates.²

Perhaps more importantly, Wall Street’s outlook for third-quarter earnings improved during the quarter. Consensus analysts’ forecasts are estimating a 0.2 percent growth in earnings for the S&P 500 companies. Although this forecast appears slightly underwhelming, it would mark the first quarter of year-over-year earnings growth since the third quarter of 2022.³

Q3 Sector Scorecard

Most industry sectors experienced declines in the third quarter, including Consumer Discretionary (-5.20 percent), Consumer Staples (-7.23 percent), Health Care (-3.01 percent), Industrials (-5.53 percent), Materials (-5.21 percent), Real Estate (-9.60 percent), Technology (-5.71 percent), Financials (-1.60 percent), and Utilities (-9.95 percent). Both Communications Services (+0.75 percent) and Energy (+11.36 percent) rose over the last three months.⁴

What Investors May Be Talking About in October

The Fed elected to keep interest rates unchanged following the September meeting of the Federal Open Market Committee (FOMC), despite some hotter-than-expected inflation data. The Fed has not signaled what it may do with regards to rates at its upcoming two-day meeting, ending on November 1st, indicating that its decision will be data dependent.⁵

With the government shutdown averted in late September, the Fed will have current data when the FOMC meets.

Expect investors to be especially sensitive to September inflation data, which is scheduled to be released in mid-October. Should consumer prices and producer prices be higher than anticipated, the prospect of a rate hike may potentially jump.

However, if the report data comes in lower than expected it may take some pressure off the Fed.

World Markets

For Q3 2023, the MSCI-EAFE Index fell 4.71 percent.⁶

European markets were mixed, with quarterly losses in France (-3.84 percent), Germany (-4.71 percent), and Spain (-1.72 percent). The U.K. tacked on 1.02 percent and Italy was flat (+0.04%).⁷

Pacific Rim markets were down for the quarter, with China’s Hang Seng falling 5.85 percent and Japan’s Nikkei dropping 4.01 percent.⁸

Indicators

Gross Domestic Product (GDP)

The final revision of second-quarter GDP reflected a 2.1 percent annualized growth rate, which was down from the first-quarter GDP growth of 2.2 percent.⁹

Employment

Nonfarm payrolls grew by 187,000 in August, while the payroll estimates of June and July were revised downward by 110,000. Over the last three months, job gains have averaged 150,000, which is down substantially from its 238,000 monthly average gain for March through May.¹⁰

Retail Sales

Retail sales rose 0.6 percent in August, although much of the gain was due to higher gasoline prices. When excluding auto and gas sales, retail sales rose just 0.2 percent, which was above the 0.1 percent consensus forecast.¹¹

Industrial Production

Industrial output at the nation’s factories, mines, and utilities rose 0.4 percent in August, exceeding expectations of a 0.2 percent gain.¹²

Housing

Housing starts skidded 11.3 percent, touching levels not seen since the pandemic. The steep decline was the result of a large drop in new construction of multifamily homes.¹³

Existing home sales fell 0.7 percent as higher mortgage rates and low inventory continued to weigh on the markets. Sales were down by 15.3 percent from last August.¹⁴

New home sales slid 8.7 percent in August, although they were higher by 5.8 percent from a year ago.¹⁵

Consumer Price Index (CPI)

A jump in gasoline prices pushed August inflation higher, with consumer prices increasing 0.6 percent month-over-month. For the last 12 months, prices have risen 3.7 percent versus the 3.2 percent annual increase in July. But core inflation, which excludes food and energy, eased from its 4.7 percent increase in July to a 4.3 percent rise in August.¹⁶

Durable Goods Orders

Orders of goods designed to last three years or longer rose 0.2 percent in August, beating economists’ expectations of a decline of 0.5 percent. Durable goods orders have risen during five of the last six months.¹⁷

The Fed

After raising interest rates by a quarter of a percentage point in July, the FOMC elected to keep interest rates unchanged following their September 19–20 meeting. They did, however, signal that another rate hike was likely before the end of the year.

In his post-announcement press conference, Fed Chair Jerome Powell emphasized that the inflation battle was not finished and future rate hike decisions would be based on the economic data.¹⁸

With the government shutdown averted in late September, the Fed will have current data when the FOMC meets Oct. 31–Nov. 1.

1. WSJ.com, September 30, 2023

2. LipperAlpha.Refinitiv.com, August 25, 2023

3. FactSet.com, September 15, 2023

4. SectorSPDR.com, September 30, 2023

5. FederalReserve.gov, 2023

6. MSCI.com, September 30, 2023

7. MSCI.com, September 30, 2023

8. MSCI.com, September 30, 2023

9. MarketWatch.com, September 28, 2023

10. WSJ.com, September 1, 2023

11. Finance.Yahoo.com, September 14, 2023

12. MarketWatch.com, September 15, 2023

13. Bloomberg.com, September 19, 2023

14. CNBC.com, September 21, 2023

15. Morningstar.com, September 26, 2023

16. WSJ.com, September 13, 2023

17. WSJ.com, September 27, 2023

18. WSJ.com, September 20, 2023

After sliding for much of last month on rising yields, credit rating downgrades, and economic weakness out of China, stocks staged a late-August rally to help reduce losses.

The Dow Jones Industrial Average lost 2.36 percent, while the Standard & Poor’s 500 Index dropped 1.77 percent. The Nasdaq Composite fell 2.17 percent.¹

Another Weak August

In recent years, August has had a reputation as a weak month for stocks. Since 1986, August stock market performance has ranked as the lowest of all 12 months, returning on average a negative 0.8 percent.²

The August 2023 weakness mirrored historical experience, so the declines seen the past month did not surprise many market analysts, especially given that the market was perhaps due for some consolidation following the strong performance through the first seven months of the year.

August Headwinds

The stock market battled a number of headwinds. Rising bond yields pressured stocks throughout the month, while investors were surprised by a downgrade of U.S. government debt at the start of the month and a credit downgrade of several banks toward the end of the month.

Economic news out of China also proved to be unsettling. Falling exports and fresh troubles in their already stressed property market indicated that China was having more difficulty escaping its economic doldrums—an unfavorable development for global growth.

Earnings Upbeat

The second earnings season came to a conclusion in August with better-than-expected results. As of August 25th, with 485 of the companies in the S&P 500 reporting, 79 percent posted earnings above market estimates. Earnings growth rates were highly dispersed, with the Consumer Discretionary sector showing solid results and the Energy sector reporting softer numbers.³

Toward the month’s end, stocks rallied on “a proceed carefully” rate hike message from Fed Chair Powell at Jackson Hole and weak economic data, which triggered a retreat in bond yields that helped push stocks higher.

Sector Scorecard

The only industry sector posting a gain was Energy, which rose 3.73 percent. The remaining industry sectors ended lower last month, with losses in Communications Services (-2.46 percent), Consumer Discretionary (-2.34 percent), Consumer Staples (-4.77 percent), Financials (-1.81 percent), Health Care (-0.43 percent), Industrials (-1.47 percent), Materials (-2.22 percent), Real Estate (-3.12 percent), Technology (-1.21 percent), and Utilities (-6.61 percent).⁴

What Investors May Be Talking About in September

All eyes are expected to shift to the Fed’s two-day meeting, which concludes on September 20. Since the Fed’s July 2023 meeting, when the federal funds rate was hiked by a quarter percentage point, inflation reports have shown moderate price increases, perhaps supporting the case for holding off on a rate hike.⁵

However, economic growth appears to be accelerating. Second-quarter gross domestic product grew at an annualized rate of 2.1 percent, which was a bit faster than the first quarter’s expansion rate of 2.0 percent.⁶

Q3 Gross Domestic Product (GDP) in Focus

However, third-quarter economic growth may be higher still. According to the Federal Reserve Bank of Atlanta’s GDPNow model, which attempts to estimate current-quarter GDP growth, the economy is forecasted to grow at an annualized rate of 5.0 percent in Q3.⁶

Although the markets believe that the rate hike cycle is nearing an end, what the FOMC decides on rates this month, and perhaps more importantly, what it signals about what it may do next, may set the tone for the financial market into the final quarter of the year.

World Markets

August weakness was more pronounced in overseas markets as investors grappled with persistent inflation in Europe, the prospect of another rate hike by the European Central Bank, and deepening economic woes in China.

For August, the MSCI-EAFE Index fell 4.10 percent.⁷

European markets were nearly uniformly lower, with losses in France (-2.42 percent), Germany (-3.04 percent), Italy (-2.74 percent), Spain (-1.41 percent), and the U.K. (-3.38 percent).⁸

Some Pacific Rim markets were even weaker. Hong Kong lost 8.45 percent, Australia 1.42 percent, and Japan 1.67 percent.⁹

Indicators

Gross Domestic Product (GDP)

GDP growth in the second quarter was revised downward, from its initial annualized growth estimate of 2.4 percent to 2.1 percent.¹⁰

Employment

Hiring moderated in July as nonfarm payrolls increased by 187,000. The increase was below the average monthly jump in the first six months. The unemployment rate fell from 3.6 percent to 3.5 percent, while average hourly earnings increased 4.4 percent from a year ago.¹¹

Retail Sales

Retail sales picked up 0.7 percent in July, exceeding the consensus estimate of 0.4 percent. Excluding auto sales, spending was up 1.0 percent. These were the best gains since January.¹²

Industrial Production

Industrial production rose one percent in July, driven by a spike in utilities use due to hot weather and an increase in automobile production.¹³

Housing

Housing starts increased 3.9 percent in July. Permits to build were up slightly (+0.1 percent).¹⁴

Existing home sales fell 2.2 percent in July from the prior month and 16.6 percent from a year ago. Low inventory continues to be an overhang, while the number of homes available for purchase remains roughly half that of pre-COVID numbers.¹⁵

New home sales increased by 4.4 percent as a shortage of existing homes drove buyers to new construction. Sales were up by 31.5 percent from last July levels.¹⁶

Consumer Price Index (CPI)

Consumer prices rose at an annual rate of 3.2 percent in July, coming in slightly below consensus forecasts and somewhat higher than June’s 3.0 percent annual rise. July’s CPI and Core CPI (excludes food and energy) monthly increase was 0.2 percent, in line with expectations.¹⁷

Durable Goods Orders

Durable goods orders fell 5.2 percent in July after four straight months of increases. It was the steepest decline since April 2020.¹⁸

The Fed

The minutes from the July meeting of the Federal Open Market Committee showed that most members voiced some risks in raising interest rates beyond the quarter-point increase they agreed to implement.

Also acknowledged was the risk that inflation would not come down sufficiently and may require additional rate increases.¹⁹

1. WSJ.com, August 31, 2023

2. MarketWatch.com, July 29, 2023

3. LipperAlpha.refinitive.com, August 25, 2023

4. SectorSPDR.com, August 31, 2023

5. FederalReserve.gov, 2023

6. AtlantaFed.org, 2023

7. MSCI.com, August 31, 2023

8. MSCI.com, August 31, 2023

9. MSCI.com, August 31, 2023

10. CNBC.com, August 30, 2023

11. WSJ.com, August 4, 2023

12. CNBC.com, August 15, 2023

13. MarketWatch.com, August 16, 2023

14. CNBC.com, August 22, 2023

15. Finance.Yahoo.com, August 23, 2023

16. CNN.com, August 23, 2023

17. CNBC.com, August 10, 2023

18. Morningstar.com, August 24, 2023

Stocks added to their strong year-to-date gains in July as investors observed decelerating inflation, better-than-expected corporate earnings, and healthy economic data.

The Dow Jones Industrial Average gained 3.35 percent, while the Standard & Poor’s 500 Index rose 3.11 percent. The Nasdaq Composite, which has led all year, advanced 4.05 percent.¹

Positive Inflation Reports

After a faltering start to the month, stocks rallied on favorable June inflation data. Consumer prices increased at the slowest rate in over two years, rising just 3 percent year-over-year. This encouraging report was followed by a smaller-than-forecast 0.1 percent rise in June producer prices (an indicator of future consumer prices).

The deflationary trend was further evidenced when the personal consumption expenditures price index, a key inflation measure watched by the Federal Reserve (Fed), rose 0.1 percent month-over-month and 4.1 percent from 12 months ago—the lowest annual increase since September 2021.²⁻³

Support from Earnings

Second-quarter earnings also boosted investor optimism last month. With 51 percent of S&P 500 companies reporting, 80 percent have reported earnings above Wall Street estimates, which is above the 5- and 10-year averages. The earnings beat in the second quarter was less impressive, however, averaging 5.9 percent, which is below the 5- and 10-year averages.⁴

Investors greeted the results with relief since the second quarter is traditionally a low point for corporate results. A number of industry sectors showed solid earnings growth, and some investors saw this as evidence of a healthy consumer and a potential sign of improving earnings in the second half of the year.⁴

Recession Fades

Finally, the overhang of a possible recession this year faded over the course of the month. Even Fed Chair Jerome Powell, following the Fed’s July meeting, remarked that the Fed no longer expected a recession this year.⁵

One of the most remarkable aspects about the market was that the Fed, as expected, raised interest rates 0.25 percent at its July meeting—and indicated that a future rate hike was not off the table—and the markets appeared to barely notice.

Sector Scorecard

All industry sectors ended in the green last month, with gains in Communications Services (+5.70 percent), Consumer Discretionary (+2.31 percent), Consumer Staples (+2.13 percent), Energy (+7.77 percent), Financials (+4.81 percent), Health Care (+1.07 percent), Industrials (+2.89 percent), Materials (+3.44 percent), Real Estate (+1.33 percent), Technology (+2.58 percent), and Utilities (+2.49 percent).⁶

What Investors May Be Talking About in August

Global central bank governors will be gathering at the Federal Reserve Bank of Kansas City’s annual Economic Policy Symposium in Jackson Hole on August 24-26.

This year’s discussion will center on structural shifts in the global economy. But investors will be focused on Fed Chair Powell’s comments on his monetary policy outlook for the coming months.

Markets Prepare for Powell

At last year’s meeting, Powell’s speech was viewed by the financial markets as especially hawkish, triggering a sell-off with S&P 500 falling 3.37 percent.⁷

As August progresses, investors will be watching the labor market and inflation since both may be key data points guiding Powell’s remarks in Jackson Hole. Any indications by Powell that the Fed may pause or stay the course may unsettle the markets.

World Markets

The MSCI EAFE Index gained 3.17 percent in July, aided by slowing inflation in Europe and China’s announcement of support for its troubled property market.⁸

European markets were higher, with gains in France (+1.32 percent), Germany (+1.85 percent), Italy (+5.01 percent), Spain (+0.51 percent), and the United Kingdom (+2.23 percent).⁹

Pacific Rim markets were mixed. China’s Hang Seng Index picked up 6.15 percent, and Australia’s ASX 200 added 2.88 percent. However, Japan was flat (-0.05 percent).¹⁰

Indicators

Gross Domestic Product (GDP)

The U.S. economy expanded by a 2.4 percent annualized rate in the second quarter. This was higher than the first quarter’s GDP growth rate of 2.0% and well above the consensus forecast.¹¹

Employment

Employers added 209,000 new jobs in June, a sharp deceleration from May’s revised 306,000 new hires. The unemployment rate fell to 3.6 percent, while average hourly wages grew 4.4 percent from a year ago.¹²

Retail Sales

Retail sales rose 0.2 percent, falling short of economists’ consensus forecast of a 0.5 percent increase.¹³

Industrial Production

Industrial production fell 0.5 percent in June. Despite falling for the second consecutive month, industrial production increased at an annualized rate of 0.7 percent in the second quarter.¹⁴

Housing

Housing starts tumbled 8.0 percent in June and were 8.1 percent lower than a year ago. Permits to build, an indicator of future new housing starts, also declined, slipping 3.7 percent from May.¹⁵

Sales of existing homes fell by 3.3 percent in June, owing to the continued tight inventory of homes on the market.¹⁶

New home sales contracted by 2.5 percent month-over-month, while increasing 23.8 percent from last June.¹⁷

Consumer Price Index (CPI)

The rise in consumer prices continued their cooling trend, falling to their lowest level in over two years. The CPI rose a modest 0.2 percent in June and 3.0 percent from a year ago. Both came in below economists’ forecasts. Core inflation (excludes food and energy) also decelerated, rising 4.8 percent from last June.¹⁸

Durable Goods Orders

Orders of goods designed to last three years or more climbed 4.7 percent in June, exceeding the estimate of 1.5 percent.¹⁹

The Fed

As widely expected, the Fed raised interest rates by a quarter percent point at its July FOMC meeting.

The U.S. central bank made little change to its previous statement in June, where it kept interest rates unchanged. Fed Chair Powell did not rule out on another hike at its September meeting but emphasized that decisions would remain data dependent.²⁰

"I would say it’s certainly possible that we will raise funds again at the September meeting if the data warranted,” said Powell after the Fed’s July meeting. “And I would also say it’s possible that we would choose to hold steady, and we’re going to be making careful assessments, as I said, meeting by meeting."²⁰

1. WSJ.com, July 31, 2023

2. CNBC.com, July 13, 2023

3. CNBC.com, July 28, 2023

4. Insight.factset.com, July 28, 2023

5. MarketWatch.com, July 26, 2023

6. SectorSPDR.com, July 31, 2023

7. CNBC.com, August 25, 2022

8. MSCI.com, July 31, 2023

9. MSCI.com, July 31, 2023

10. MSCI.com, July 31, 2023

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16. WSJ.com, July 20, 2023

17. Reuters.com, July 26, 2023

18. WSJ.com, July 12, 2023

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20. WSJ.com, July 26, 2023