Posts by Sound Planning Group Team

While various indicators like inflation, employment, consumer spending, and consumer confidence, point to an economic slowdown, the key question is whether this trend will persist as solely a slowdown or escalate into a recession, compelling investors to be patient for more data to roll out.

When the Fed starts cutting rates, it will either come from a place of victory over inflation or out of necessity to stop the economy from a downturn. In either case, lower rates will probably be the push the residential real estate market needs to get out of its current gridlock, which will also impact future inflation.

This week, consumer credit data revealed increased revolving debt, like credit cards, as consumer sentiment has fallen over the past four months but remains higher than a year ago. Q3 earnings season, almost complete, has generally surpassed expectations, contributing to a more positive outlook for corporations.

In the week ending on November 3rd, equity markets rallied on signals from the Federal Reserve that the rate-hiking cycle might be at its end. Consumer confidence declined for the third straight month, despite other economic metrics showing a consumer that is still spending heavily.

This week marked a lower close for equities in the last full week of October, despite positive economic data and Q3 earnings growth. Third-quarter GDP exceeded expectations, primarily driven by increased consumer spending and government expenditures. September Durable Goods orders were strong, particularly in the transportation sector.

The Leading Economic Index raised ongoing economic concerns, while September Existing Home Sales declined from a year ago with a very modest gain in home prices. We also saw initial claims reach a 10-month low last week, underscoring the strength of the labor market.

In a week full of data, inflation continues to clock in above the Federal Reserve’s 2% target, with September’s CPI and PPI indexes both coming in hot this week. Earnings look to be faring well so far for the third quarter, with 5% of the S&P 500 having been reported at this time, largely beating estimates. In other news, consumer sentiment fell in October, as consumers note continually higher prices, like we saw in the CPI. Overall, the economy looks to be in a pivotal position, with higher rates, inflation, and geopolitical risk being in the forefront of investors’ minds.

The first week of October came full of economic data and movements in interest rates, as equities saw large swings but ultimately ended lower. As of close Thursday October 5th, the Nasdaq Composite fell -0.66%, the S&P 500 fell -0.7%, and the Dow Jones Industrial Average fell -0.94% for the week.

We closed out the month of September with a week for the bears, as we avoided a government shutdown and face the realities of a slowing economy. Consumers are feeling less confident in the economy, while new home sales came in slimmer than expected.

Other important economic data points provided mixed signals this week including bearish leading indicators, a slow existing home sales market, and strong labor data in initial claims. Overall, we remain partially bearish and partially bullish on this unique environment, as we see the end of the rate hiking cycle coming closer to an end.