DIASTOLE ECONOMIC AND MARKET COMMENT
September 9, 2024

Last Friday the August jobs numbers came in lower than expected, although the unemployment rate did slip from 4.3% to 4.3%. And there was a nano-second in between “slow jobs growth means interest-rate cuts - yay!” and “slow jobs growth means a recession is here and our hair is on fire.” It was fun while it lasted.

And now we’re looking at a Federal Reserve conundrum. Do they cut rates by 0.25% next week and risk disappointing investors? Or cut by 0.50% and risk alarming investors that things are worse than they knew? Nine days to go.

By the end of the trading week, we saw steep weekly losses in stocks, along with gains in bonds. The Dow Jones Industrials fell 2.9% for the week, while the Standard & Poor’s 500 fell 4.2% and the Nasdaq Composite Index dropped 5.8%.

Another cause for concern was the un-inverting of the yield curve. Which just means that long bonds got back to yielding more than short bonds. Which is normal. But apparently, if an inverted yield curve means, “oh no a recession is coming”, then the un-inversion means, “a recession must be here.” So, that’s a lose-lose.

According to Bloomberg, the jobs report wasn’t even weak, and 4.2% unemployment means we are basically at full employment. AND wages are still rising faster than inflation. Thank you, Bloomberg.

Sorry this is abbreviated. More next week.

For the week ending on September 6th, the S&P finished at 5,408, the Dow at 40,345, and the Nasdaq at 16,690. The yield on the ten-year Treasury Note closed lower at 3.708%. U.S. crude oil cost $68.16 per barrel (also lower, as the U.S. pumps more and China needs less). N.Y. gold cost $2,498.25 per ounce, and one Euro was worth $1.10.

Elizabeth E. Cook
Partner, Diastole Wealth Management

News and information presented here, albeit briefly, was still gathered from many sources, including, but not limited to: The Wall Street Journal, The New York Times, The Washington Post, Bloomberg, Axios, Yahoo Finance, The Economist, CNBC, Barron’s, CNN, Reuters, and The Associated Press. If you have questions, please call us at 203.458.5220.

According to U.S. News & World Report, the ninth most popular name for American cats is “Kitty”. They determined this by polling every family in America that has a pet cat, no wait, they questioned every veterinarian’s office in the country, uh, no, they actually just walked down to their local daycare and asked two toddlers what their cats were called. Oh, never mind.

DIASTOLE ECONOMIC AND MARKET COMMENT
September 16, 2024

It’s Fed Week! It’s Fed Week! And we don’t know yet what is going to happen. Which is weird, because usually by this time before an interest rate announcement, JPow has rented a crop duster to fly by with a banner revealing to us the immediate future. The punditry is pretty sure that a rate cut is coming, but whether it will be a quarter point or a half point is still unclear. Watch for the Wall Street Journal to give us a clue before Wednesday’s release of the Fed’s decision.

Consumers have been waiting a long time for this coming interest-rate cut, as they struggled with mortgage rates and credit card charges. But I will admit that higher interest rates have had their intended effect, and inflation has been reduced dramatically. The question now is whether these coming rate cuts are in time to encourage businesses to hire.

Also of note: Thursday is International Talk Like a Pirate Day, so whatever the Federal Reserve does on Wednesday, we will know that the right response is “Arrrrrgh”.

The August Consumer-Price Index (CPI) was released last week, and showed that inflation had slowed to 2.5% in the trailing 12 months. Perhaps more importantly, the inflation figure for core inflation for the trailing three months (annualized) was down to 2.1%. Just a little over two years ago, in June of 2022, the CPI hit 9.1%. This is better than that.

Now the Producer-Price Index for August was also released last week, and indicated that prices for final-demand rose 1.7% for the year ending in August. That’s below the Fed’s 2% inflation target, and probably makes it easier for the Fed to cut rates this week. If, in fact, that’s what they’re going to do. I think so, but we’ll see.

Annual American median household income in 2023 was $80,610. That was up from $77,540 in 2022 - just about 4% higher in one year. With wages running ahead of inflation recently, families are actually gaining ground. Of course, men’s median earnings rose twice as much as women’s, according to Axios.

The housing market still hurts, but mortgage rates are finally sliding a little - down to 6.2% from more than 7.7% a year ago. But we must remember that over the past 50 years, standard mortgage rates have averaged 7.72%, according to The Mortgage Reports. From the ‘90s through the ‘00s, mortgage rates were roughly where they are today.

Of course mortgage rates are not all that’s hurting potential homebuyers. Lack of inventory is still driving prices higher. If your town is anything like mine, starter homes are selling for half a million dollars, with step-up homes approaching one million. Yikes. Builders are constructing rental units, but those rents are also sky-high. I guess if you’re a young worker, you’re lucky if your parents even have a basement for you to live in.

The Social Security cost-of-living adjustment (COLA) for 2024 was 3.2%. The COLA for 2025 is expected to be around 2.5%. The increase is based on the CPI in October of the prior year.

And speaking of government spending, there will be none after the end of September unless Congress gets itself in gear and passes a spending measure. Yes, we are facing another government shutdown. Oh no! House Speaker Mike Johnson was planning a vote to avoid a government shutdown, but scrapped it when opposition from his own party members became apparent. The calculus for a government shutdown seems to be who will be helped by it in the coming election.

Still think that you might delve into cryptocurrencies? According to an FBI report, 10% of all financial-fraud complaints last year involved cryptos, but they accounted for 50% of total losses. Beware the Nigerian princes!

A new law that took effect this year allows unused 529-plan funds to be transferred to a Roth IRA tax-free up to certain limits. It’s hard to believe that anyone has unused 529-plan funds given the cost of education, but it does happen. The excess funds can be transferred to a Roth for the benefit of the student, with a cap of $35,000 per beneficiary. Ask your advisor for more details.

For the week ending on September 13th, the Standard & Poor’s 500 finished at 5,626, the Dow Jones Industrial Average at 41,393, and the Nasdaq Composite Index at 17,683. The yield on the ten-year Treasury Note closed at 3.65%. U.S. crude oil cost $68.52 per barrel, N.Y. gold cost $2,578.24 per ounce, and one Euro was worth $1.11.

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 Finance, Bloomberg, Barron’s, MarketWatch, Business Insider, Morning Brew, The Economist, Barron’s, The Wall Street Journal, The New York Times, The Washington Post, CNN, CNBC, Reuters, and the Associated Press. If you have questions, please call us at 203.458.5220.

Want to quit your job, but afraid of your boss? In Japan you can pay someone else to quit for you. Just $140-150 will get relieve you of your anxiety AND your job. Black roses cost more, of course, and repeat customers get a 50% discount. (That last one is true.)

DIASTOLE ECONOMIC AND MARKET COMMENT
September 23, 2024

You may have already heard, but the Federal Reserve cut interest rates by half a percentage point on Wednesday last week. What? We weren’t ready! There was no early signaling or leaking of the size of the rate cut in advance. Just half a point, and then a press conference with Chairman Jerome Powell, who indicated that inflation is less of a concern now, and employment is more of one. Markets went crazy - by which I mean they did nothing much, but dropped a little. Why? Well, the half-point rate cut took some (all) investors by surprise, and some (all) investors wondered if the Fed knew something that we didn’t and that the economy was actually in bad shape.

Nope. On Thursday we received the usual weekly unemployment-claims report and the news was mildly improved. Jobs are not being lost in droves. Markets really did go crazy then, with the Dow Jones Industrials and the Standard & Poor’s 500 both reaching record new highs <yawn> AGAIN. The Nasdaq was 2.5% higher on Thursday, with the S&P up 1.7%. A brief reminder here that the stock market is a leading indicator, and as such is said to predict our economy about six months into the future. I hope so.

During Powell’s press conference, he almost came right out and said that there would be a quarter point cut in November and again in December. (There is not an October Fed meeting because if there were we would all be making “spooky” comments about interest rates.) So, it’s very possible that by the end of the year we’ll be looking at a Fed-funds rate of 4.25%-4.50%. And with four more cuts being hinted at for next year, we might see a Fed-funds rate below 3.5% by the end of 2025. Not all interest rates will follow the Fed down immediately (we’re looking at you, credit cards), but over time there should be a sigh as the air seeps out of higher rates.

Mortgages are already down more than a point from over 7% to just above 6%. Not necessarily enough to attract homeowners to move, but getting there.

Last week, a deal to keep the government open past its fiscal-year end on September 30th fell apart. But yesterday, Speaker of the House Mike Johnson released a new plan that funds the government through December 20th. Because nobody has anything else to do in December, right? This deal probably removes government funding as a presidential-campaign issue, although it shouldn’t. Keeping the government open seems to be the most basic job that Congress has, and they barely get it done.

Microsoft has just signed a 20-year contract with Constellation Energy to buy power from its Three Mile Island plant. Yes, that Three Mile Island. Despite the 1979 partial nuclear meltdown at the plant, it continued to operate until 2019, when it was shut down because it was too expensive to run. Now that Microsoft is promising to purchase its output, Constellation will refurbish the reactor and plans to restart it in 2028. What could go wrong?

Every year, golfers lose at least 1.5 billion golf balls. The U.S., which has about 43% of the world’s golf courses, probably accounts for more than six million of them. Most of them end up in the water. Or the trees. Or the sand. A company named Found Golf Balls recovers and resells millions of lost balls in the U.S. and Canada each year. Just FYI - there are more golf courses in America than there are Starbucks or McDonald’s, according to the National Golf Foundation.

For the week ending on September 20th, the S&P 500 finished at 5,702, the Dow at 42,063, and the Nasdaq at 17,948. The yield on the ten-year Treasury Note closed at 3.728%. U.S. crude oil cost $71.25 per barrel, N.Y. gold cost $2,636.80 per ounce, and one Euro was worth $1.11.

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, Business Insider, 1440 Digest, Yahoo Finance, Axios, Bloomberg, The Wall Street Journal, The New York Times, The Washington Post, USA Today, The Economist, Barron’s, MarketWatch, CNBC, CNN, Reuters, and The Associated Press, If you have questions, please call us at 203.458.5220.

A Chinese zoo just admitted something that its paying customers already knew: its star-attraction pandas are just painted dogs. Yes, the pandas on display are Chow Chow dogs painted to look like pandas. They are painted dogs. How many ways can I say this? Zoo goers realized the problem when the “pandas” started panting, barking, and wagging their tails - actions common to pandas when they are, in fact, painted dogs.

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.