2024 Fall Economic Update

Dear Clients and Friends,

Hope you enjoyed your summer and had a great Labor Day. As we navigate the current economic landscape and calendar, there will be a good amount of data coming out in the coming weeks and months. As we all know, there is also an upcoming presidential election as well many geopolitcal events continuing to develop. As mentioned in previous updates, the markets will remain wavy to choppy during these periods. Although, we remain optimistic that the general trend over time will continue in positive direction for equities as well as lower interest rates.

Markets Roared Back

After enduring a steep sell-off to begin August, the broad market S&P 500® (SPX) ultimately led the major indices higher in August, gaining 2.3% on the month to cap off its fourth straight monthly gain. The Dow Jones Industrial Average also surged higher, making a fresh new high and gaining 1.8% on the month. After a volatile July, the tech-heavy NASDAQ Composite Index (COMP) gained just shy of 1% in August and appears to be back on track.

Buoying stock prices for the month was a string of strong economic reports, including an inflation report in line with expectations, an improving home sales market, and positive news on the consumer confidence front. Also driving interest in stocks was the markets’ anticipation of the Fed starting to cut interest rates in September. The upcoming cut will likely be 0.25% rather than a more aggressive 0.50% cut.

Additionally, corporate earnings have largely exceeded expectations, indicating that businesses are navigating the economic environment effectively. Many companies have demonstrated their ability to manage costs, increase efficiency, and drive revenue growth. Despite facing challenges such as supply chain disruptions and rising interest rates, businesses have shown resilience and adaptability.

Positive Inflation Reports

While inflation remains a focus, recent data suggests that inflationary pressures may be easing. The latest numbers on inflation continue to show progress. According to the inflation data from the US Bureau of Economic Analysis, the personal consumption expenditures price index (PCE) rose 0.2% in July and 2.5% compared to a year ago, which aligned with Dow Jones estimates. The yearly numbers have now dropped or stayed the same for the last five months.

Continuing improvement in inflation has all but guaranteed that the Fed will begin cuƫng rates in September, most likely at the 25 basis point level. And while the unemployment rate remains low at 4.3%, data suggests the potential of some labor market softening. Lower interest rates could help reduce the risk of that softening.

Consumer Confidence Upbeat

The latest report on how consumers feel about their economic and professional prospects is upbeat. The Conference Board Consumer Confidence Index® rose to 103.3 in August, up from the 101.9 reading in July. How consumers feel about the current business and labor market conditions also moved higher to 134.4 from 133.1 in July. The key expectations index – which gauges how consumers feel about the short-term outlook for labor, business, and income – improved to 82.5 in August. 

After an upward revision of July’s results to 81.1. August was the second consecuƟve month the expectations index recorded levels above 80. A reading below 80 usually signals the potential for a recession.

Housing Market Showing Improvement

After reaching a 23-year high of 7.8%, the average rate of the benchmark 30-year fixed rate mortgage now stands around 6.5%, a considerable improvement and the lowest level in 15 months. With interest rate cuts on the horizon, mortgage rates will likely continue to drop.

Those improving rates are likely behind a mixed but somewhat improving home sales report. According to the National Association of Realtors (NAR), sales of existing homes rose 1.3% in June to an annual rate of 3.95 million units. July’s sales figures were slightly better than the 3.92 million units expected by economists and reversed a four-month slide.

September is Life Insurance Awareness Month

Most people know that life insurance provides a death benefit that can help cover expenses. Some types of life insurance can also provide supplemental income that can help with maintaining your lifestyle in retirement, travel costs, caring for a loved one—or any other purpose you choose. You may have heard some myths about life insurance – take a look at the attachment to learn more. 

Reach out if you would like to schedule a meeting to review your WealthPlan with the team. As always, we are here to help. Stay well and speak with you soon.