After 24 days of government shutdown, we finally got a data point from the Bureau of Labor Statistics. It took recalling 100 workers from furlough (probably still not being paid), but on Friday we learned that the consumer price index (CPI) rose 3% for the year ending on September 30th, while the CPI rose 0.3% for the month of September. The numbers were slightly better than expected and stock markets rose to yet more record highs.
Even though 3% is higher than the Federal Reserve’s target inflation rate of 2%, investors are still expecting the Fed to lower interest rates this Wednesday at the end of their Open Market Committee meeting. Normally the FOMC would RAISE rates to counteract inflation, but the Fed also has the other mandate of keeping full employment, and it LOWERS rates to accomplish that. Now that the federal workers who were laid off in the spring have run out of benefits, they are looking for work, and employers are not hiring much, and lower interest rates are meant to put their businesses in a position to do so. Make sense?
One reason why the CPI needed to be calculated is that Social Security payments for 2026 are based in part on the CPI from October. The Social Security Administration announced that recipients will receive a 2.8% cost of living adjustment beginning in January.
As interest rates fall, so do average mortgage rates, which dropped to 6.19% from 6.27% in the week ending on September 23rd. Usually when mortgage rates fall, home prices rise, since often buyers are most concerned about their monthly payment. But we live in upside-down times, and home prices are also softening. This is good news for the economy, although not for home sellers. At the same time, rents are falling across the country as all of the rental units which have been built in response to demand are finally finished. Also good news. This is not necessarily true in New York City, however, where the minimum wage will soon have to be in the millions of dollars just so that workers can afford a studio apartment.
Did you know that a subprime borrower is one whose credit score is below 670? And now 6.43% of subprime borrowers are at least 60 days late on their car loans. According to CNN, vehicles are being repossessed at the highest rate since the Great Recession of 2008. That is not a good sign, since car loans are usually the last payments that Americans skip when they are in financial trouble.
The Trump administration is planning to release more than $3 billion (which had been frozen in the government shut down) in aid to U.S. farmers who are suffering from the effects of Trump-era tariffs. You’re probably already familiar with the plight of American soybean farmers, who have lost the Chinese market. To add insult to injury, the Trump administration is sending extra aid to Argentina, which is now selling its own soybeans to China. Is the world a zero-sum game? Probably not, since the size of the world population keeps growing and the size of global markets keep growing. But sometimes it feels like it.
The unemployment rate for people aged 20-24 was 9.2% in August, per the Wall Street Journal. That’s about twice what the overall unemployment rate was. This situation could be adding to weakness in the rental market, since young workers may not be earning enough to afford their own apartments. Back into mom’s basement they go.
Last Tuesday, gold prices dropped 5.2% in one day to $4,1335.40 per ounce, due primarily to profit-taking among gold investors, and a strengthening U.S. dollar. Gold prices are slightly lower than that today, while the dollar continues to increase in value. But it’s still not strong, with $1.16 required to buy one Euro, when three years ago, the two currencies reached a 1:1 parity. Boy, THAT was the time to visit Europe. Except for Covid, of course.
The average age of video-game players is 14. No, wait, I mean 41. Didn’t see that coming, did you? Of course, if Candy Crush counts, it all makes sense.
For the week ending on October 24th, the Standard & Poor’s 500 finished at 6,791, the Dow Jones Industrial Average at 47,207, and the Nasdaq Composite Index at 23,204. The yield on the ten-year Treasury Note finished at 3.99% but is slightly higher today. U.S. crude oil cost $61.50 per barrel (higher than last week after the U.S. sanctioned Russian oil shipments), N.Y. gold cost $4,079.56 per ounce, and one Euro was worth $1.16.
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, Reuters, The Wall Street Journal, The Hustle, Axios, Business Insider, CNBC, The Washington Post, CNN, USA Today, Bloomberg, The Associated Press, Yahoo Finance, Morning Brew, and CNBC. If you have questions, please call us at 203.458.5220, or reply to this email to reach me, Liz Cook.
It’s not just Fed week, it’s Halloween week! Oh, I hope Jerome Powell wears a costume! Or at least his dog. Consumers will spend $860 million on pet costumes this year. That’s almost three ballrooms! And it’s about 61% of what consumers will spend on children’s costumes. But the real winners of Halloween are the people who bought life-sized animatronic dinosaurs from a New Jersey theme park that was closing. There’s nothing that says, “Want some candy little boy?” like a roaring dinosaur in your front yard.