As the US gears up for the third-quarter GDP report next month, current analyses suggest a noticeable decline in economic growth. This assessment comes from the median estimates derived from various nowcasts provided by CapitalSpectator.com.
In July, US job openings experienced a significant decline, reaching a level reminiscent of a four-and-a-half-year low, which has intensified speculations that the labor market is cooling. This data has reinforced expectations that the Federal Reserve may reduce interest rates in its forthcoming policy meeting on September 17th. “This marks a pivotal shift for the labor market,” stated Heather Long, chief economist at Navy Federal Credit Union. “It signifies yet another crack in the market.”
The long-term expected return for the Global Market Index (GMI) remained in the low 7% range last August, as determined by the average of three different models (which are defined below). This anticipated performance is significantly lower than the trailing ten-year return for GMI, which is a market-value weighted mix of the major asset classes (excluding cash).
US manufacturing activity contracted for the sixth consecutive month in August, according to the ISM Manufacturing Index. However, a glimmer of hope was seen as the new orders component rose to 51.4 last month, indicating a slight growth rate. “Currently, I view the overall economy and particularly the manufacturing sector as being in a holding pattern until uncertainties related to tariffs diminish,” noted Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.
Global equities in developed markets outside the US continued to lead the major asset classes in August, as evidenced by a collection of ETFs. The recent rally has bolstered the year-to-date performance of these stocks, which are significantly outperforming their counterparts.
US PCE inflation remained unchanged in July, posting a year-over-year rate of 2.6%, while core PCE inched up to 2.9%, the highest figure since February. “The Fed has opened the door to potential rate cuts, though the extent of this will largely depend on whether labor market weaknesses emerge as a more significant risk than rising inflation,” commented Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “The current PCE Price Index aligns with focus on the jobs market, and for now, expectations still lean towards a September cut.”
The Capital Spectator will observe the upcoming Labor Day weekend without any work-related activities. The production line will resume on Tuesday, September 2. Cheers!
Are market movements due to President Trump’s pressure on the Federal Reserve to lower rates? Or perhaps the underlying concerns about slowing economic growth and diminishing expectations for tariffs influencing inflation are to blame. It’s likely a combination of these factors. Regardless of the reasoning, market confidence remains high that the Federal Reserve will cut its target rate in the upcoming meeting on September 17th.
Chipmaker Nvidia reported earnings and revenue that exceeded expectations on Wednesday, showcasing the continued strength of AI-related investments. “The company is projected to maintain over 50% growth [year on year] with a $50 billion quarterly revenue run rate – which is impressive, even given the current valuation,” commented David Wagner, head of equity at Aptus Capital Advisors. Matt Orton, head of advisory solutions at Raymond James Investment Management, added, “This underscores the resilience of this (AI) investment…” He noted that the performance indicates a stable acceleration in business from these hyperscalers without any signs of a slowdown reflected in Nvidia’s results.
Multiple factors are contributing to the rising electricity prices at a time when inflation concerns are increasing. The upcoming consumer inflation report for August, which arrives just days before the Federal Reserve’s interest rate meeting, will be scrutinized for indications that tariffs might be fueling pricing pressures.
