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.

Despite a variety of bearish inflationary data including CPI and PPI, we saw equity markets close higher for the week as of Thursday. Inflationary data rose more quickly than expected as energy prices weighed heavily on both consumers and producers in August.

Equity markets declined this week, with August’s ISM Services and Manufacturing Indexes coming in higher than a month ago. Initial jobless claims came in much lower than expected, and Apple faced challenges from Chinese iPhone restrictions on government workers. The upcoming September FOMC meeting is expected to maintain rates, but market sentiment could quickly shift with a surprise in August CPI data.

Currently, we are carefully observing the potential effects that these actions may exert on both markets and our portfolios. This vigilant monitoring will persist as the well-being of the banking system remains a critical component of the functionality of both the US and global economies.

Inflation continued to show disinflationary signs this week with July’s CPI and PPI figures coming in, as small & mid-sized banks were downgraded by Moody’s and surprised investors. Additionally, we saw that consumers are feeling more encouraged by economic conditions as seen in the University of Michigan’s Consumer Sentiment Index, despite oil prices rising in July. In every economic environment, we look forward to continuing to monitor markets closely.

This week was a week for the bulls, with Consumer Confidence and higher personal spending demonstrating an optimistic consumer and Durable Goods Orders pointing to resilient industrial demand. Fed Chair Jerome Powell brought us another 0.25% rate hike in the July FOMC, as key PCE inflation on Friday pointed to a continued disinflationary environment.

During this quarter, the Federal Open Market Committee met twice, once in May and once in June. May’s meeting brought a 25-basis point rate hike, bringing the target range to 5.0-5.25%, while the June meeting brought the most recent Summary of Economic Projections from the Fed members.

n another month of disinflation, CPI, PPI, and PCE all made downward moves, as the Federal Reserve decided against another rate hike at their June FOMC meeting. Although data is slowly but surely moving in the right direction, the fight against inflation remains.

Our team of skilled analysts will diligently monitor economic data as it becomes available in order to effectively manage each portfolio across different macroeconomic environments.

One thing we have seen this week, is that uncertainty is certain in this economy, with the US avoiding a default on their debt at the last minute. At the same time, manufacturing indexes show that we may already be in a near recessionary environment, while over +300k monthly job gains in May tell a very different story. Every day of economic data seems to provide a different narrative of how the US economy is doing.

In all macroeconomic environments, our team of talented analysts will continue to constantly monitor economic data as it rolls out to best manage each portfolio.

We hope this stickier month of inflation data from April is more of an outlier and less of a trend, and we are hopeful inflation comes down as the lagging effects of higher interest rates ripple throughout the economy. If inflation does not calm down as quickly as we, the Fed, and many other market participants hope, we will monitor data closely and manage portfolios appropriately.

Author: Joe Maas, CIO, SPG Advisors, LLC QUARTERLY COMMENTARY Q1 of 2023 brought positive returns in both the S&P 500 (+7.03%) and the Nasdaq Composite (+16.77%), with a muted Dow Jones Industrial Average (+0.38%). Accordingly, Q1 saw a major shift towards growth stocks, unlike in Q4 of 2022, as the Russell 1000 Growth gained strong…

We’re sure you’ve heard of the concern of banks defaulting. Here’s a a quick recap of what happened the week of March 10th: Last week, regulators seized Silicon Valley Bank (NASDAQ: SIVB), the nation’s 16th-largest bank. The bank was declared insolvent after it couldn’t satisfy withdrawals by depositors last Thursday and Friday. How did a…

Author: Joe Maas, Chief Investment Officer, SPG Advisors LLC Financial Markets Investors ended the last full week of February concerned over a likely more sustained period of quantitative tightening, as Fed members speak out and more economic data comes in. Year to date, as of Thursday, February 23rd, the S&P 500 is up +4.5%, the…

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Posted February 22, 2022 Geopolitical Market Review – The markets continue to experience turbulence as Ukraine defends itself from Russia’s invasion. Heightened geopolitical risks on top of the anticipated unwinding of the Fed’s bond purchases and rate increases have pushed the volatility index known as the VIX to 29.47, which is down from the 12-month…

Posted February 22, 2022 The Unsuspecting Drivers of U.S. Inflation and Market Volatility As U.S consumers continue to feel the pinch of rising costs on everything from food, gasoline, apparel, home furnishings, and travel, inflation increased 7.5% in January 2022 from one year prior. Record inflation has brought with it market volatility and geopolitical instability…

Posted January 14, 2022 Inflation – CPI All Items Hits Highest Annual Rate of Change Since June 1982 On Tuesday, January 11, 2022, at the Federal Reserve Chairman Jerome Powell’s Senate confirmation hearing, chairman Powell called high inflation a “severe threat” to a full economic recovery and that the central bank was preparing to raise…

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Posted Friday December 10, 2021 As strong consumer demand and supply shortages continue to pressure prices on everything from food, energy, and automobiles, the U.S. Labor Department reported inflation for the month of November at a 39-year high of 6.8%. Despite the high inflation rates we have witnessed over the past year, the main driver…

Posted November 17, 2021 – S&P 500 EPS Growth Comparison for 2021, 2022 & 2023 As a follow-up to last week’s Deflating the Fears of Longer-Term Inflation talking points, we are now well into the second half of Q3 2021 earnings season and if one thing has become crystal clear, it is that 2022 is…

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