### Summary
The US economy and markets appear to be in good shape, with a strong stock market, low inflation, and low unemployment. However, there are potential risks on the horizon, including the impact of the Federal Reserve's monetary tightening, supply and labor shocks from the pandemic, political polarization, and the possibility of another government shutdown. While the overall outlook for investing remains uncertain, it's important for investors to prepare for any eventuality.
### Facts
- The US stock market is close to its 2022 peak, inflation is less severe than a year ago, and the economy remains strong with low unemployment.
- The Federal Reserve has raised interest rates by 5 percentage points, which could lead to economic growth faltering.
- The US economy is facing supply and labor shocks from the pandemic and commodity shortages caused by Russia's war with Ukraine.
- Falling prices in China could contribute to disinflation in the US and elsewhere.
- Political polarization in the US and the possibility of another government shutdown could negatively impact the economy and markets.
- Despite the resilience and stability of the economy and markets, there are still risks to consider, including a crisis in commercial real estate and the potential for inflation to flare up again.
- Some economists and surveys predict a 50% probability of a recession occurring within the next 12 months.
- Investing should be based on a long-term outlook and a diversified portfolio, with cash on hand to cover expenses.
Note: Due to the nature of the text provided, some of the facts may be subjective or based on the author's opinion.
### Summary
Wharton finance professor Jeremy Siegel believes that increased productivity will prevent a resurgence in inflation in the US.
### Facts
- 💰 Wharton finance professor Jeremy Siegel is not worried about inflation rebounding in the US, despite the signs of a resilient economy.
- 💼 GDP is expected to grow 5.8% over the third quarter, according to an estimate from the Atlanta Fed.
- 💼 Job growth and wage growth remain strong, with the US adding 187,000 payrolls and hourly earnings up 4.4% year over year in July.
- 💼 The recent improvement in statistics is attributed to a turnaround in productivity, which was poor last year.
- 💼 Siegel believes that the bounce-back in productivity will keep inflation in check and justify higher wages.
- 💼 However, other experts, like BlackRock, are more skeptical about the path of inflation.
- 💼 The Fed remains concerned about inflation and is open to more tightening measures.
- 💼 Stocks have slid as investors bet on the Fed hiking rates before the end of the year.
The blog emphasizes that the war on inflation has been won and that a recession is coming, as indicated by various indicators such as CPI, recession probabilities, freight industry performance, and weak retail sales. The post also highlights the struggles in China's economy and suggests that investors should buy bonds.
The U.S. economy continues to grow above-trend, consumer spending remains strong, and the labor market is tight; however, there are concerns about inflation and rising interest rates which could impact the economy and consumer balance sheets, leading to a gradual softening of the labor market.
Inflation is causing a decline in affordability for average working individuals, with prices on everyday necessities such as groceries, gasoline, and housing rising significantly in the past two years due to government spending and the Fed's money-printing.
The stock market experienced a sharp decline as early gains turned into a selloff, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all falling; concerns over rising bond yields and inflation contributed to the sell-off.
Stocks are overvalued and a recession is expected in the first half of next year, according to economist Steve Hanke. He predicts that inflation will cool, Treasury yields will fall, and house prices will remain stable.
US equity markets were relatively stagnant last week, with major indexes trading up and down around their 200-day moving averages, indicating a lack of direction and potential resistance, while Treasury markets appeared to stabilize despite an inverted yield curve, suggesting a potential recession on the horizon. Fed Chair Jerome Powell's hawkish speech on Friday emphasized the need for caution and the possibility of higher interest rates, while Nvidia's strong earnings highlighted the company's dominance in the artificial intelligence sector.
Stocks were relatively unchanged as investors awaited new economic indicators and data on the health of the US economy, including consumer confidence, jobs openings, and inflation reports, which could impact expectations for future interest-rate rises from the Federal Reserve.
Buyers returned to the stock market after positive data on the U.S. jobs market suggested that wage inflation may decrease further, with Microsoft stock showing promising signs in forming a new base, while China's PDD Holdings experienced a significant gain amid hopes of government measures to stimulate economic activity. Additionally, megacap tech stocks led a broad rally in the stock market, with the Nasdaq composite rising 1.7%, and there is anticipation of a potential increase in the overnight fed funds rate and a rise in bond yields.
Wall Street is experiencing small gains and losses as investors await economic news, including an inflation indicator and more jobs data; markets rallied after consumer confidence dropped in August and job openings fell, potentially reducing inflation and deterring the Fed from raising interest rates.
The US job market is cooling down, with signs of weakening and a slowdown in momentum, which may allow the Federal Reserve to ease inflation pressure through weaker job creation and reduced demand.
Cleveland Fed President Loretta Mester said that even though there has been some progress, inflation is still too high and the jobs market remains strong, with the Fed's efforts to bring down inflation helping labor demand and supply to balance.
Stock investors have been reacting positively to "bad economic news" as it may imply a slowdown in the economy and a potential halt to interest rate hikes by the Federal Reserve, however, for this trend to change, economic data would have to be much worse than it is currently.
Despite recent optimism around the U.S. economy, Deutsche Bank analysts believe that a recession is more likely than a "soft landing" as the Federal Reserve tightens monetary conditions to curb inflation.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
The article discusses how the rate of inflation has impacted processors, distributors, and other middlemen, with some benefiting from price increases but now at risk of a slowdown.
The odds of a recession in the US have collapsed, making markets vulnerable to any signs of the economy overheating and contributing to inflationary pressures.
U.S. stock investors are closely watching next week's inflation data, which may determine the future of the equity rally, as signs of a soft landing for the U.S. economy have contributed to the S&P 500's gains, but too high inflation could lead to fears of higher interest rates and stock sell-offs.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
The war on inflation is almost over, as higher supply rather than lower demand has driven disinflation, creating a "Goldilocks" scenario in which inflation cools without a recession, according to economist Paul Krugman and a new report.
Stocks rise as reports suggest the US economy is strong, but inflation remains a concern.
The Federal Reserve's measure of inflation is disconnected from market conditions, increasing the likelihood of a recession, according to Duke University finance professor Campbell Harvey. If the central bank continues to raise interest rates based on this flawed inflation gauge, the severity of the economic downturn could worsen.
The Federal Reserve's concern over inflation and its potential impact on the economy is being compared to the inflationary period of the 1970s, but there are significant differences in the economic landscape today, including a higher debt burden and a shift from manufacturing to services as the primary driver of economic activity. As a result, a repeat of the high inflation and interest rates of the 1970s is unlikely, and the bigger worry should be the potential for a financial crisis in a debt-dependent financial system.
Investors are focusing on the release of economic reports on GDP and inflation as they evaluate the Federal Reserve's stance on interest rates and its efforts to cool down inflation. Metal prices have slipped due to concerns over global demand and the economy, and the risk of a government shutdown is also adding to the bearish sentiment. Earnings reports from various companies and core PCE inflation data are expected in the week ahead.
The Dow Jones Industrial Average dropped as the stock market correction worsened, and the 10-year Treasury yield reached new highs, with key inflation data expected later in the week, while Tesla stock fell and Apple and Microsoft stocks were mixed.
Despite recent market volatility and central bank decisions, the focus should remain on inflation, which is expected to continue on a downward trajectory, leading to potential gains in the stock market in the fourth quarter.
Inflation is expected to rebound in 2024 due to a mismatch between supply and demand created by the shift from services to goods during the pandemic, as well as a chronic shortage of workers, according to BlackRock strategists. This could lead to higher interest rates and a higher risk of recession.
Stocks tumbled and fears about the US economy grew as economic data revealed a cloudy outlook and the potential for further interest rate hikes from the Federal Reserve.
The Federal Reserve's forecast for the U.S. economy shows that while inflation and unemployment are close to their goals, economic growth will remain weak, primarily due to low labor productivity.
The U.S. stock market has experienced a decline due to conflicting economic news and a surge in bond yields, which may be driven by factors other than data, such as fiscal deficits and central bank policies.
Investors should move away from growth stocks and towards value stocks due to an impending rebound in inflation, according to Rob Arnott, founder of Research Affiliates, who also cautioned that the hype surrounding AI is diminishing and a recession may occur if interest rates remain high.
Investors are growing concerned about the possibility of stagflation as oil prices rise and inflation remains stubbornly high, with some predicting a recession is on the horizon. The recent surge in oil prices has amplified the risk of stagflation, characterized by slow growth, high unemployment, and soaring inflation. While unemployment rates are relatively low, fears are growing that mounting layoffs could change this. Analysts warn that the surge in oil prices will likely keep inflation higher and negatively impact economic growth. The global economy's escape from stagflation is now being reconsidered.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
U.S. stocks mostly fell as investors considered the latest inflation data from the Federal Reserve, marking the end of a turbulent month for the market.
Summary: The U.S. stock market had a bad quarter, with all indexes falling, while the World Bank lowered its growth forecast for developing economies in East Asia and the Pacific, and China's demand for commodities continues to grow despite the downgrade. Additionally, a last-minute spending bill was passed to avoid a government shutdown, and this week's focus will be on the labor market.
The market is experiencing a gradual decline after a summer rally, as inflation remains above the target range and there are concerns about a forced correction of the economy due to the higher for longer rate environment; the overvalued nature of equity valuations also contributes to the risk of a broader market crash.
Stocks slumped as the bond rout continues and one Fed policymaker predicted another interest rate hike this year, with the Nasdaq falling 0.5% and the S&P 500 and Dow Jones Industrial Average losing 0.4%.
Former Treasury Secretary Lawrence Summers says that the surge in US job growth is positive news for now, but it also suggests that the Federal Reserve's interest-rate hikes are no longer as effective, increasing the risk of a hard landing for the economy.
Stock markets are wavering as investors anticipate another rate hike by the US Federal Reserve, fearing its impact on the global economy, however, recent inflation data suggests that inflation is declining and consumer spending is rising.
The stock market initially reacted negatively to September's strong job report, but later rebounded as evidence of a cooling job market and minimal wage growth tempered fears of inflation, leading to uncertainty about potential interest rate hikes by the Federal Reserve.
Amid concerns about high oil prices, sticky inflation, and rising wages, investors may be poised to panic, but a closer look reveals a more positive long-term outlook with solid job market, moderating inflation, and decent growth.
The article discusses the fear of a wage-price spiral and warns that if inflation is allowed to linger, it could lead to a cycle of increasing wages and prices, resulting in high inflation and a severe recession, as seen in the late 1970s and early 1980s.
The U.S. stock market is currently trading at a discount to fair value, and Morningstar expects rates to come down faster due to optimism on inflation; strong growth is projected in Q3, but the economy may slow down in Q4, and inflation is expected to fall in 2023 and reach the Fed's 2% target in 2024. The report also provides outlooks for various sectors, including technology, energy, and utilities, and highlights some top stock picks. The fixed-income outlook suggests that while interest rates may rise in the short term, rates are expected to come down over time, making it a good time for longer-term fixed-income investments. The corporate bond market has outperformed this year, and although bankruptcies and downgrades may increase, investors are still being adequately compensated for the risks.
Headline inflation is expected to have eased in September, while pay growth is slowing, with economists predicting that annual inflation fell slightly to 6.5% from 6.7% in August, although it still remains well above the Bank of England's 2% target, and the jobs market weakening and reducing the need for employers to increase wages.
Economists are predicting that the U.S. economy is less likely to experience a recession in the next year, with the likelihood dropping below 50% for the first time since last year, thanks to factors such as falling inflation, the Federal Reserve halting interest rate hikes, and a strong labor market.
The US economy is heading towards a recession that is likely to be milder than previous ones, as it is being "engineered" by the Federal Reserve and they have the ability to reverse the measures that slowed growth.
Despite positive economic news, the stock market experienced a decline due to the realization that interest rates are likely to remain high, resulting in a decrease in stock valuations; however, the market is expected to rebound in the long term due to strong earnings growth and a solid economic foundation.
Wall Street economists and the Federal Reserve have lowered the probability of a recession within the next year, citing declining inflation, a stable Federal Reserve, and strong economic growth, but this optimism is based on lagging economic data and fails to consider the potential negative revisions in the future.
