Fall is coming, but so is a hurricane. Where you live determines which one hits you first. I’m actually cuspish on the hurricane but looking forward to the season change. Temps in the 70s with low humidity is my idea of heaven. Yay next week!
Markets rose last week, still in the wake of the bad jobs report we saw on August 1st. Why celebrate bad news? Because sometimes bad news is good news when we’re talking about interest rates. Weakness in the jobs market might push the Federal Reserve Open Market Committee (OMC) into making an interest rate cut. But OTHER bad news, like the Producer Price Index (PPI) rising back over 3%, might encourage the OMC to raise rates to tamp down inflation. So which is it?
I’m glad you asked! Fed Chairman Jerome Powell is scheduled to speak at Jackson Hole, Wyoming on Friday. We will ALL be watching to see what he signals or hints or suggests about what the OMC will or won’t do at its next meeting in mid-September. Reading tea leaves is hard.
A great majority of Fed-watchers polled believe that at least a quarter of a point rate cut is coming next month. That doesn’t mean they’re right. But that kind of “certainty” leads to other actions, too. For instance, last week, investors flowed into U.S. bonds before the assumed rate cuts, which actually pushed bond prices higher and yields lower. At the same time, foreign investors sold the dollar, pushing its value lower compared to other currencies. How could both happen at once? After all, foreign investors have to buy dollars in order to buy U.S. bonds and Treasurys. Well, maybe it was domestic buyers of our bonds and foreign sellers of our currency. Or maybe that was the day I missed in Econ 400. Just kidding! I missed lots of days!
Market breadth is increasing, which means that more than just big tech stocks are rallying. And that’s crucial for sustaining a bull market. Last week UnitedHealth was a big winner, as we learned that Warren Buffett’s Berkshire Hathaway bought $1.6 billion worth of UnitedHealth shares in the first quarter of this year. Learning this, other investors followed suit. 40% of S&P 500 companies increased their earnings projections during second quarter earnings season, which is just wrapping up.
Now that many of the announced tariffs have gone into effect, we are beginning to see prices rise. The cost of fresh and dry vegetables rose 38.9% from June to July (dry vegetables?) Overall import prices increased 0.4% in the same period. Meanwhile, 70% of fund managers are expecting stagflation, which Barron’s defines as “weaker-than-normal growth and faster-than-normal inflation.”
Spending in beauty shops is an indicator of how good the American consumer is feeling about the economy. So is the cardboard industry, which is crucial to online shopping. “Sales of corrugated cardboard used to make boxes are slumping, signaling that retail demand across industries may be due for a correction.” (Bloomberg)
But, the 30-year fixed mortgage rate has fallen to its lowest level since last October, averaging 6.58% for the week ending on August 14th. Will we see the mortgage rate move upward because of PPI inflation? Or downward because of interest-rate cut expectations? We are teetering in the middle. Is it a good time to lock in a mortgage rate? Yes if you’re refinancing from a much higher rate (probably not too many of these out there) and yes also, if you’re planning on buying a new home. While rates seem high compared to those we experienced during the pandemic, they are not unusually high compared to historical rates.
AOL is ending dial-up internet service on September 30th. When AOL was the hottest thing in the 80s and 90s, it could transmit up to 56 kilobits a second. Today we expect megabits and gigabits. Adios AOL screeching!
For the week ending on August 15th, the S&P 500 finished at 6,449, the Dow Industrials at 44,946, and the Nasdaq Composite at 21,622. The yield on the ten-year Treasury Bond was lower at 4.328%. U.S. crude oil cost $62.18 per barrel, N.Y. gold cost $3,349.10 per ounce, and one Euro was worth $1.17.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Yahoo Finance, Barron’s, The Wall Street Journal, CNBC, Reuters, Axios, Bloomberg, The Bureau of Labor Statistics, The Economist, USA Today, CNN, The Associated Press, Business Insider, and The Washington Post. If you have questions, please call Diastole at 203.458.5220, or reply to this email to reach me, Liz Cook.
You probably can’t guess where I’m going next. Human composting. Yup. Human composting. It’s gaining traction in the funeral industry, which reassures us that in five to seven weeks, a body placed in a vessel with various plant matter will decompose fully. After another three to five weeks of “curing”, the material is usable in parks, forests, and gardens. I’m somewhere between ick and cool on this. I would need heavy gloves to use this compost. Very heavy long gloves, or like, a hazmat suit?