Main financial assets discussed:
- Inflation
- Interest rates
- Treasury yields
- Medical Properties Trust (MPW)
- S&P 500 (SPY)
Top 3 key points:
1. Negative real rates have been the norm for the past two decades, but currently, we likely have positive real rates. It is important to use the right measurement periods to evaluate real rates accurately.
2. Inflation should be defined more precisely, and the use of trailing data for housing in inflation indexes can lead to underestimation or overestimation of market price changes.
3. The Federal Reserve may raise rates again, driven by the desire to maintain a tough image and the market's optimism about a no-recession scenario. However, strong real economic growth is unlikely.
Recommended actions: **Hold**
1. The labor market shows signs of modest cooling, but is still hot.
2. The S&P 500 index is approaching its all-time high and continues to trend upward.
3. The banking sector is still struggling, but upcoming earnings reports may provide some optimism.
The U.S. economy and markets seem to be in good shape for now, but there are concerns about the potential for problems in the future due to factors such as rising interest rates, supply and labor shocks, and political uncertainties.
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.
Recent profit reports from companies such as Amazon, Walmart, and Home Depot, along with other consumer statistics, indicate that the case for a 2023 recession is weakening, as the consumer economy shows resilience with rising real incomes, substantial savings, and continued spending in sectors like automobiles and services.
The US economy continues to perform well despite the Federal Reserve's interest rate hikes, leading to questions about whether rates need to be higher and more prolonged to cool inflation and slow growth.
Despite the optimism from some economists and Wall Street experts, economist Oren Klachkin believes that elevated interest rates, restrictive Federal Reserve policy, and tight lending standards will lead to a mild recession in late 2023 due to decreased consumer spending and slow hiring, although he acknowledges that the definition of a recession may not be met due to some industries thriving while others struggle.
Despite the inverted yield curve, which traditionally predicts an economic downturn, the US economy has remained strong due to factors such as fiscal and monetary stimulus efforts and a lag time before interest rate hikes impact the economy, but some bond market experts believe the yield curve will eventually prove to be a good indicator for the market and the economy.
The Federal Reserve Economic Database (FRED) provides accurate economic data, revealing positive trends such as increased labor force participation and decreased unemployment, but also challenges like labor shortages and rising prices, particularly in food and gas. Consumer sentiment remains skeptical despite these improvements, as illustrated by rising household credit card debt and unaffordable housing prices. Policymakers could address these issues through immigration reform, fiscal restraint, and zoning law reforms. Overall, the data suggests that the economy is slowly returning to normalcy, but further actions are needed to sustain the recovery.
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.
Britain's experience with quantitative easing (QE) and monetary policy has had both positive and negative impacts, with the unnecessary prolonged period of cheap money causing damage, the kamikaze printing of money during the pandemic feeding inflation and leaving taxpayers with a large bill, but also some good news as inflation is expected to decelerate and boost spending power as real incomes rise, although second-round effects could ensure inflation's persistence. The UK economy is weak and policy should focus on averting recession and challenging consensus-thinking on future growth, as the country's composite Purchasing Managers Index (PMI) has fallen to a 31-month low, with the services sector slipping into recession and a slump in retail sales in August. Higher interest rates are causing corporate distress, suggesting the need to stop raising rates, while elevated policy rates and selling of gilts by the Bank of England will keep upward pressure on long-term yields and borrowing and mortgage rates. The expectation of positive real interest rates signals the end of cheap money and offers an opportunity in Britain to rethink fiscal and supply-side policy, encouraging investment, innovation, competitiveness, and improved skills. Overall, the outlook is characterized by falling inflation, weak growth, and the opportunity to reset monetary policy and focus on fiscal policy, the supply side, and investment.
Despite a decline in August, the US market is still in good shape, with a correction in stocks being viewed as a normal breather rather than the start of a bear market, while various trends and indicators suggest a continuation of the bullish trend.
US labor market remains strong despite signs of better balance, with future interest rate decisions dependent on incoming data, says Federal Reserve Bank of Cleveland President Loretta Mester.
The August jobs report shows a healthy labor market with steady growth, although there are signs of cooling due to higher interest rates and downward revisions to previous job numbers, but overall it is seen as a robust report, with women and immigrants playing a significant role in the labor force. There are some concerns, such as Americans spending down their savings and potential consequences of the Federal Reserve's rate hikes.
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.
September historically has been a challenging month for stocks, but reduced concerns about a recession, signs of a potential shift in Fed policy, and positive sector trends point to the possibility of strategic investment opportunities this year.
The US Federal Reserve is expected to hold interest rates steady in September while leaving the door open for possible rate hikes in the future, as it tackles inflation and assesses the health of the economy.
The US economy is currently in decent shape, with a resilient labor market, moderated inflation, and expected strong GDP growth, but there are potential headwinds and uncertainties ahead, including UAW strikes, student debt payments resuming, and the risk of a government shutdown, which could collectively have a significant impact on the economy. Additionally, the labor market is slowing down, inflation remains a concern, and the actions of the Federal Reserve and other factors could influence the economic outlook. While there are reasons for optimism, there are also risks to consider.
The recent surge in long-term interest rates, reaching the highest levels in 16 years, poses a threat to the US economy by putting the housing market recovery at risk and hindering business investment, as well as affecting equity markets and potentially slowing down economic growth.
The current state of the consumer is concerning as wages are not keeping up with inflation, excess savings from the pandemic have been depleted, and increasing levels of credit card debt are making it difficult to maintain spending levels, leading to potential economic headwinds.
The economy's performance, including consumer spending, labor market conditions, and inflation, suggests a temporary positive outlook, but it may not be sufficient to prevent a decline in stock prices.
Despite September historically being a weak month for stocks, the next quarter tends to be the best-performing period of the year, making it a good time to invest in undervalued stocks like Alphabet.
Americans' views of the economy have worsened in September, with only 20 percent saying economic conditions are good and 73 percent believing that economic conditions in the country as a whole are worsening, according to a recent Gallup poll.
The summer's positive economic indicators, such as lower inflation and strong job numbers, have led to optimism that the US will avoid a recession, but factors such as a potential auto strike, the resumption of student-loan repayments, and a government shutdown could contribute to a downturn. The combined impact of these factors, along with others like higher interest rates and oil prices, suggests that a recession may be looming.
The US economy added 336,000 jobs in September, exceeding expectations, but investors are concerned about the prospect of higher interest rates, causing stocks to slump and bond yields to surge.
The September jobs report shows a robust job market, but rising inflation and slow wage growth are making Americans feel worse about the economy.
Despite positive economic indicators such as job growth and low unemployment, the perception of a healthy economy is overshadowed by the high cost of living, including inflation, rising housing prices, and increased interest rates.
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 latest U.S. Jobs Report shows 336,000 new jobs added in September, exceeding expectations and indicating a strong economy that may lead to another rate hike from the Fed. Higher Treasury yields may result in more volatility in stocks and impact sectors such as mortgages and finance. However, this may also present attractive buying opportunities in beaten-down market sectors. Investors should conduct solid research and diversify their portfolios.
The US economy added an impressive 336,000 jobs in September, indicating its resilience and suggesting that higher interest rates are here to stay, which could potentially lead to a new bull market for risk assets and cryptocurrencies.
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.
The UK economy's marginal growth in August has led to expectations that interest rates will remain unchanged next month, with analysts describing the figures as lacklustre and warning of the negative impact of higher borrowing costs and the higher cost of living on consumers and businesses. The economy is currently not in recession but concerns over weak growth persist, making it a key issue in the upcoming election.
The report on consumer prices in September shows that inflation remains steady but still poses challenges, leading economists to predict that the Federal Reserve will keep the possibility of a final interest rate increase this year open.
Investors are hopeful that the year-long decline in profits for Corporate America will come to an end with a projected rebound in the final quarter, but concerns about the fragile economy, high interest rates, and wary consumers suggest that any relief for stocks may be short-lived.
The strong performance of the US consumer, with retail sales rising 0.7% in September, could lead to more Federal Reserve rate hikes and upside risks to inflation entering the fourth quarter of 2023.
Americans continue to spend at a steady pace despite higher prices and rising interest rates, with retail sales in September exceeding expectations and online and restaurant spending seeing significant increases.
Economic activity in most districts remained unchanged since early September, with mixed consumer spending, slight declines in loan demand, and a mixed outlook for the economy, according to the Federal Reserve's Beige Book report. Labor conditions eased with improvements in hiring, but recruiting skilled workers remains a challenge, while wage growth remained moderate. Prices continued to rise, albeit at a slower pace.
The US economy is expected to experience significant growth in the third quarter, despite a 0.7% decline in the leading economic index in September, with forecasts suggesting a GDP expansion of over 4%; however, analysts warn that the late stages of a business cycle may not provide clear indications of an imminent downturn.
The UK's job market is showing signs of weakening due to rising prices and high interest rates, leading to expectations that interest rates will remain unchanged in November and indicating a slow and weak economic growth.
The U.S. economy saw improvement at the start of the fourth quarter, with the service and manufacturing sectors experiencing growth, slowed inflation, and fresh hopes that interest rates have peaked, according to S&P surveys.
Economists believe the US economy had a strong summer, but warnings from Wall Street figures like Bill Gross and Bill Ackman suggest an economic downturn has already begun, with evidence of weakening demand and rising Treasury yields. Investors are advised to prepare with a mix of risky and safe assets.
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.
The United States economy grew at a 4.9 percent annual rate in the third quarter due to strong consumer spending and a robust job market, but this pace is not expected to be sustained in the future.
The US economy experienced strong growth in the third quarter of 2023, fueled by consumer spending, but there are warning signs of a possible recession due to the impact of rate hikes on auto loans, credit cards, and student debt, as well as higher borrowing costs and the potential for deeper recession if the Federal Reserve continues to raise interest rates.
Against all odds, the US economy grew at an annualized rate of almost 5% last quarter, more than double the previous quarter, largely due to the power of low mortgage and loan rates, strong consumer balance sheets, increased productivity, and low employee turnover; however, there are concerns that the Federal Reserve hasn't done enough to combat inflation and that future revisions may change the story.
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.
Despite initial predictions of a recession, the U.S. economy has seen strong growth thanks to resilient consumer spending, but forecasters caution that it may not last as inflation remains higher than desired and consumer attitudes towards the economy remain negative.
