DIASTOLE ECONOMIC AND MARKET COMMENT
September 30, 2024
There was not much news last week, but what there was was generally good. At least Congress got it together to pass the Continuing Resolution that will keep the government open until December 20th, and the president signed the bill. There were hours to spare!
And last Friday, the government released the PCE (Personal Consumption Expenditures) report for August. It showed that prices rose just 2.2% on a yearly basis. Given the Federal Reserve’s 2% target inflation rate, I’m sure that Fed Chairman Jerome Powell and his Fed colleagues breathed a sigh of relief. Their rate cut of 0.50% announced ten days ago seems appropriate now, and not premature.
Recent unemployment claims showed that the newly jobless number was about 6,000 lower than forecast. Durable goods orders were flat in August, versus a predicted decline. AND the U.S. gross domestic product (GDP) for the second quarter was confirmed at 3% annualized - ahead of the 2.3% annual GDP growth seen from 2018 to 2023.
For eight straight weeks now, the rate on a 30-year fixed mortgage has dropped, mostly recently to 6.08%. The rate on an average 15-year mortgage was 5.16%
So - a soft landing after all? It still looks possible-to-probable.
The stock market, which as you know is made up of lots of markets, had another good week, with all three major indices marking their third consecutive week of gains. The Dow Industrial Average closed at another record high.
But there are always headwinds. Right now we are waiting to learn if dockworkers will strike across dozens of U.S. ports tonight, potentially re-snarling the supply chains that took so much time to straighten out after the pandemic. If there is a strike and it lasts, we will see higher prices for food (that will spoil while waiting to be unloaded) and other goods.
It is generally understood that big pharmaceutical companies charge high prices for their products to cover the costs of research and development for those drugs as well as for other projects that didn’t work out. But what about Novo Nordisk, the maker of Ozembic and Wegovy? Sales of those two drugs will shortly surpass Novo’s R&D budget for the PAST THREE DECADES ($68 billion). I’m sure that we’ll see drug prices fall as soon as that happens. Maybe to zero? You heard it here first!
China is the world’s second-largest economy, but lately it hasn’t been chugging so much as creeping along. One major reason is the country’s dependence on real estate to buoy corporate profits and personal balance sheets, and the Chinese regulations that allow apartments to be sold before they are built, and held at future value. High-interest-rate mortgages are another problem. In order to deal with this last issue, China is now allowing home buyers to refinance their mortgages when prevailing interest rates fall below locked-in mortgage rates. AND the government will now allow banks and borrowers to take advantage of new, lower interest rates immediately instead of waiting until the following January 1st for changes to take effect. Let us just say that Americans already have those rights, and it’s a good example of Chinese central planning ignoring the natural consequences of its actions that China is only now allowing these actions.
The FBI has released crime statistics for 2023, and they show that murders declined 11.6% versus 2022, overall violent crime decreased 3% year-over-year, but auto thefts increased 12.6%.
There are those among us who can’t wait to decorate for Halloween. So I am signing an executive order that tomorrow, October 1st, is the day the skeletons come out. Yes, some people have jumped the gun, but now, with clarity, things will be more orderly. You’re welcome. (I know there’s still confusion about November/December decor. Decision to come.)
For the week ending on September 27th, the S&P 500 finished at 5,738, the Dow at 42,313, and the Nasdaq Composite at 18,119. The yield on the ten-year Treasury closed at 3.749%. U.S. crude oil cost $68.35 per barrel, N.Y. gold cost $2,658.91 per ounce, and one Euro was worth $1.12.
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) Axios, Barron’s, Bloomberg, Yahoo Finance, CNN, CNBC, The Wall Street Journal, The New York Times, The Washington Post, USA Today, Morning Brew, Business Insider, CBS, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220.
In an attempt to build an advanced navy, China is embracing nuclear submarines. Sadly, one of the submarines has sunk, and not in a cool disappearing-from-sight way. More like a we-can-still-see-it-in-the-shallow-water-by-the-dock way. Which is also, weirdly, kind of cool.
DIASTOLE ECONOMIC AND MARKET COMMENT
October 7, 2024
With stock markets making regular record new highs, and with our first Federal Reserve rate cut of this cycle in the rear-view mirror, and with inflation nearing the Fed’s 2% target rate, it remained only to see what was happening in jobs to get a 30,000-foot picture of the U.S. economy.
And that news came on Friday with the September jobs report. 150,000 net new jobs were predicted, and 254,000 were added. Yay! Soft landing! And wages rose 4.0% year over year - in the face of a 2.2% inflation rate. More yay! The unemployment rate dropped from 4.2% to 4.1%. All good news!
So why am I worried? I’m always worried! Geopolitical conflict is now more widespread than in recent years. And even though the dockworkers apparently resolved their strike, it’s not settled until they vote. And the good jobs number practically guarantees that the Fed will NOT cut rates by another 0.50% at its next meeting in November. Maybe we’ll see a 0.25% cut, or we may not see a cut at all. December is another opportunity.
Stock markets like predictability. Well, who doesn’t? But we are now in the last month before a presidential election, it’s close, and it matters. According to the Wall Street Journal, “Trump’s recent tax-cut promises pushed his fiscal plan deep into the red, and he would increase budget deficits by more than twice as much as Harris would, according to a new study that is the most comprehensive accounting to date of the presidential candidates’ proposals.” Of course there are lots of other differences between the candidates, but this is a family newsletter, so we’ll leave it there.
Americans are wealthier than ever, thanks to the pandemic. During the stock market uncertainties of 2020, families invested in undervalued stocks, and held on through the vicissitudes of the market. Over the past five years, U.S. household financial wealth has risen by 38% to $120 trillion, per JPMorgan Asset Management (as reported by Axios). At the same time, Americans have “just” $35 trillion in home equity. Wouldn’t you have guessed it the other way around?
In other news, Elon Musk has ridden the value of Twitter (now X) down from the $44 billion he paid for it (with friends) two years ago, to approximately $9.4 billion, according to Fidelity. Falling ad revenue is seen as the biggest negative facing the company. On the other hand, Musk’s SpaceX is apparently the only rocket company we can now trust to get our astronauts home from actual space. On the other OTHER hand, Tesla’s Cybertruck has been subject to five recalls since it was first released less than a year ago.
If you’re curious about artificial intelligence (AI), but don’t know how to try it, just go to OpenAI and then go to ChatGPT to ask questions, or otherwise interact with AI. Warning: It’s very seductive! OpenAI is in the middle of transitioning from a charitable nonprofit to a for-profit company. Its recent fundraising round valued the company at $157 billion. If OpenAI does not complete its conversion, recent investors have the right to withdraw their money,
For the week ending on October 4th, the Standard & Poor’s 500 finished at 5,751, the Dow Jones Industrial Average at 42,352, and the Nasdaq Composite Index at 18,137. The yield on the ten-year Treasury Note closed at 3.981%. U.S. oil cost $74.45 per barrel, N.Y. gold cost $2,652.16 per ounce, and one Euro was worth $1.10.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be accurate, including (but not limited to) The Wall Street Journal, The New York Times, The Washington Post, USA Today, JPMorgan Chase, Bloomberg, Barron’s, MarketWatch, Axios, Morning Brew, Business Insider, Yahoo Finance, The Economist, Bloomberg, CNBC, CNN, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5229.
The Wall Street Journal has reported that lab mice fed a popular food dye used to make Cheetos orange, became transparent, letting researchers see their internal organs, their muscles at work, and their blood circulating. What if the researchers could do this to people? I think it’s pretty obvious that what they would see are Cheetos. Lots of Cheetos.
DIASTOLE ECONOMIC AND MARKET COMMENT
October 14, 2024
Today is National Indigenous Peoples Day. Let’s celebrate by not working! Oh, wait. Despite being a federal holiday, the stock and bond markets are open, therefore Diastole is open, therefore I am at my desk. That’s probably fair since I am not, in fact, indigenous. But I salute those who are.
Friday marked the two-year anniversary of the current bull market. During the past two years, coming off a Covid-era low, the Nasdaq Composite Index has risen 88%. The Standard & Poor’s Composite Index is up 62%, and the Dow Jones Industrial Average is 46% higher. This is why people should remain invested when markets drop: because the climbing-out-of-the-hole begins immediately.
In the same two years of the current bull market, the Michigan Consumer Sentiment Index has risen almost 40%.
Last week the September consumer price index (CPI) was released, as was the September producer price index (PPI). The first measures prices that consumers pay for goods and services, while the second measures the prices that producers receive for what they sell. The CPI was up 2.4% year-over-year, which was slightly higher than expected, but was also the lowest increase since February 2021. The PPI came in unchanged on a monthly basis and 1.76% higher than a year ago. The Federal Reserve’s target inflation rate is 2%.
The Fed lowered interest rates by 0.50% last month, and the next meeting of the Fed’s Open Market Committee is next month. It’s too soon to say what the FOMC is likely to do in November, but we will keep our ear to the ground (so that we will be the first to know if a posse, or rate cut, is coming our way).
The Social Security Administration has announced that its 2025 cost-of-living adjustment will be 2.5%. That is based on the CPI data for the third quarter of 2024, through September. While the increase in benefits is welcomed by recipients, it is not as welcome as 2023’s increase of 8.7%. Of course, that came with inflation at the same levels, so maybe not.
A brief and shocking note about the U.S. deficit: according to the Washington Post, “the United States has racked up so much debt over the past two decades that it spends more money paying off its interest than it does on the military.” I honestly had no idea.
I spend plenty of time bashing Elon Musk and his various ventures (and opinions) but even I have to admit that yesterday’s “catching” of the SpaceX booster rocket by its metal tower was amazing. This technology allows SpaceX to reuse booster rockets - an enormous savings for any space program. Meanwhile, Boeing has announced that it is laying off 10% of its workforce (approximately 17,000) while 30,000 of its factory workers remain on strike. You will remember that SpaceX will fly to the space station in early 2025 to retrieve two astronauts stranded there by a Boeing rocket.
For the week ending on October 11th, the S&P closed at a record 5,815, the Dow closed at a record high of 42,863, and the Nasdaq finished at 18,342. The yield on the ten-year Treasury Note ended at 4.073%. U.S. crude oil cost $75.49 per barrel, and N.Y. gold cost $2,660.48 per ounce. One Euro was worth $1.09.
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) Axios, Yahoo Financial, Morning Brew, Fortune, The Economist, Business Insider, Barron’s, MarketWatch, The Wall Street Journal, The New York Times, The Washington Post, USA Today, CNBC, CNN, Reuters, and The Associated Press. If you have questions, please call Diastole at 203.458.5220, or reply to this email to reach me, Liz Cook.
The America’s Cup race is down to its last two competitors: the defender New Zealand, and the challenger Great Britain. It is a sore subject with some Brits, who remember that the race was invented by them in 1851 and they have never won it. In case you’re wondering about the name, it is the America’s Cup because the first winner was a yacht named America from the New York Yacht Club. Britain’s current entry in the race, which has had to beat four competitors in order to reach the finals, cost nearly half a billion dollars to develop, and flies above the waves on hydrofoils. Sails are moved by athletes peddling stationary bicycles down below. This year, the race takes place near Barcelona, and the finals, which began on Saturday, will wrap up on October 27th. Check your t.v. listings for the incredibly inconvenient time at which you can watch the race.
DIASTOLE ECONOMIC AND MARKET COMMENT
October 21, 2024
Early voting is underway here in Connecticut and in many other states. If you’re inclined the same way I am, politically, get out there and vote! If not, then I fully understand why you might be too busy to get to the polls.
As a result of all of the politicking going on, people have been distracted from investments toward polls, weird videos, and speculation. Lots and lots of speculation.
Elsewhere, the stock market keeps hitting record new highs. The Standard & Poor’s 500 is up 37.9% over the past 12 months. The Nasdaq Composite is 39.9% higher year-over-year. The Dow Jones Industrial Average, laggard that it is, is 31.1% higher over the trailing 12 months. But bond markets are falling ever-so-slightly, pushing yields a little higher. It could be that investors are now seeing strong economic news as a sign that the Fed will be slower to cut rates going forward.
Mortgage rates are also edging higher rather than falling in the wake of the Federal Reserve’s September rate cut. Why? Demand is strong, both from people buying homes and those trying to refinance their 7% mortgages. In other words, banks are doing it because they can. After all, if they can borrow from the Fed at 5%, shouldn’t they try to loan out money for as much as the market will allow? Bad if you need a mortgage. Good if you own bank stocks.
Meanwhile, the European Central Bank has just lowered interest rates for the third time this year. It’s a sign that the European economies are not as strong as ours, and they need the kind of fuel that lower rates provide.
A long-lost original copy (oxymoron!) of the U.S. Constitution, which was found in a dusty file cabinet, just sold for $9 million dollars. Only eight copies are known to exist, and the other seven are publicly owned. No word yet on who bought it. Hint: not me.
For the week ending on October 18th, the S&P 500 closed at 5,864, the Dow at 43,275, and the Nasdaq at 18,489. The yield on the ten-year Treasury Note finished at 4.073%. U.S. crude oil cost $69.22 per barrel, N.Y. gold cost $2,721.41 per ounce, and one Euro was worth $1.09.
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): The Wall Street Journal, The New York Times, The Washington Post, USA Today, Barron’s, MarketWatch, The Economist, Bloomberg, Axios, Business Insider, The Hustle, Morning Brew, CNN, CNBC, Reuters, and The Associated Press. If you have questions, please call Diastole at 203.458.5220.
It was a short news week, so thank goodness for Minute Maid Lemonade. 13,000 cases of the soft drink were recalled because they were mislabeled as “zero sugar”. when in fact the beverages were full-sugar versions of the drink. That actually seems like the best of two worlds: guilt-free yet flavor-full. Send me those cases!