First markets were closed last Monday for labor day. Then we saw optimism about a coming interest-rate cut move markets higher, and finally, on Friday, we saw bad news bringing markets lower. Which is it, people? Is bad news good or is bad news bad?
By the end of the week it was definitely bad news bad. Friday’s August job report shocked on the downside, with only 22,000 net new jobs created versus 75,000 jobs expected. And if that weren’t enough, the June jobs report was revised downward into negative territory. 13,000 jobs were lost in June. The unemployment rate rose to 4.3%. For the first time in more than four years, there are more job seekers than open positions. Economists generally see 150,000 net new jobs in a month be be a “healthy” target. (CNN)
After the jobs report, analysts saw the chance of a Federal Reserve rate hike next week as almost assured. The Fed is tasked with keeping employment high and prices low. (The opposite: low employment and high prices, is “stagflation”.) Later this week, the newest inflation numbers will be released. The Producer Price Index comes on Wednesday while the Consumer Price Index (CPI) comes on Thursday. If they are in line with what we’ve been seeing (around 3%) I think the rate reduction will come. But anything higher and we will have to wait and see.
We are still watching the healthcare and social-assistance sectors of the job market leading what growth we have. Thank goodness for aging baby-boomers. We’re not buying much, and we refuse to sell our low-mortgage-rate homes, but we’re also in bad health! Without health-services, we would not be seeing much labor-market growth at all.
And on the home front, mortgage-interest rates are finally falling a little – also due to expectations of a rate cut. The normal old 30-year mortgage has just dropped to around 6.3% from a recent high of 7%. This may help clear the logjam a little, although the 6% threshold seems to be psychologically important. If we see rates below 6%, we should also see more listings in the real-estate market, as well as more mortgage refinancing.
The cost of electricity is rising faster than the rate of inflation, and it’s not due to tariffs. No – it’s the cost of artificial intelligence (AI). An internet search using AI uses more electricity than a regular Google search, and if your experience is anything like mine, you don’t seem to have a choice NOT to use AI. It’s all over my searches, and my emails. It’s like Hal the computer from 2001: A Space Odyssey, which can’t be switched off.
As for tariffs, a current lawsuit will no doubt end up in the Supreme Court. The case rests on the premise that only Congress can enact taxes, and tariffs are taxes. If the Supremes rule in favor of that point of view, the government may have to refund the tariff monies they’ve collected from businesses – approximately $210 billion at this point. But it is quite possible that they will rule differently.
According to an Economist/YouGov poll, 52% of U.S. adults say that the economy is “getting worse” while only 24% say it’s getting better. 20% says it’s about the same. (Axios) That leads to Americans planning to pull back their holiday spending this year – by about 5%. First on the chopping block are gifts, with money for food and essentials expected to remain the same. Time for us all to get out our popsicle sticks and glitter.
Two people shared the win in Saturday’s PowerBall drawing. Each may choose a lump-sum payment of $450 million or so (before taxes). How do you know that I didn’t win? I’m still at work!
For the week ending on September 5th, the Standard & Poor’s 500 finished at 6,481, the Nasdaq Composite at 21,700, and the Dow Jones Industrial Average at 45,400. The yield on the two-year Treasury Note was lower at 4.086% (meaning prices rose). U.S. crude oil cost $62.47 per barrel (OPEC+ plans to increase production to gain market share), N.Y. gold cost $3,616.00 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) Barron’s, CNN, The Wall Street Journal, Axios, Bloomberg, Yahoo Finance, The New York Times, The Bureau of Labor Statistics, The Washington Post, Business Insider, The Hustle, and National Geographic. If you have questions, please call Diastole at 203.458.5220, or reply to this email to reach me, Liz Cook.
Lego is releasing its biggest and most expensive set of Legos yet. The nine-thousand piece kit sells for nearly $1,000. With it, you can build a two-foot-tall Death Starr and enact such famous movie scenes as Han Solo and his pals in the garbage compactor. About 15% of Lego kits are sold for adults. Self-care comes in many forms!