After well over a month without rain, right on cue, with the start of fall last Sunday, we have now had six straight days of precipitation, with three more in the forecast. If only the weather (and financial markets) were always that predictable. While we were spoiled in the Midwest with the weather this summer, I can only hope that the entirety of fall will be less dreary. But much like the changing seasons, the markets remind us that nothing stays the same for long, and we should expect the unexpected. Enjoy the interesting and unpredictable statistics below.
The Easing Cycle Has Begun. The Fed cut interest rates by 50 bps to a new range of 4.75-5.00%. This was the first rate cut in the U.S. since 2020, ending the tightest monetary policy since September 2007.
Did Anyone See this Coming? In short, no. With the S&P 500 hovering around 5,750, it is now well over 300 above the highest year-end price target from Wall Street Stetegists and 18% above the average price target (4,861).
You Don’t Need a Software Engineer? Somewhat surprisingly, even though advanced technology remains at the forefront of many company long-range plans, job postings for software developers are down more than 30% since February 2020.
Lower School Costs. Spending on back-to-school shopping this year is expected to total $39 billion, or $875 per household. That’s down 1.7% from expected spending in 2023 but still up 25.5% from pre-Covid levels in 2019. (Source: National Retail Federation)
Not As Bad as Expected. Twenty years ago, Gallup found that only 54% of non-retirees aged 45-60 surveyed expected to have enough money to live comfortably in retirement. 79% of that same group, now retired between the ages of 65-80, say they have enough money to live comfortably. (Source: Gallup)
Slow and Steady. On 8/28, shares of Berkshire Hathaway crossed the trillion-dollar market cap threshold just two days before Chairman and CEO Warren Buffett’s 94th birthday. Berkshire is one of just seven U.S. companies in the trillion-dollar club and is the only one from the Financials sector. (Source: CNBC, Bespoke)
A.I. Eating Tech Budgets. Worldwide spending on A.I. and AI-enabled technologies will exceed $630 billion by 2028 for an annualized growth rate of 29%. Use cases expected to see the most substantial growth include Augmented Claims Processing and Digital Commerce, which are forecast to see annualized growth of 35.8% and 33.2%, respectively. (Source: IDC)
Office Values Plummet. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), the value of U.S. office properties declined 14.4% on a year/year total return basis through 6/30/24. Besides the previous four quarters, where YoY returns were even worse, the only more negative readings were during the Financial Crisis of 2009. (Source: Bloomberg)
Below 100k. ADP’s monthly employment report released on 9/5 showed job creation of 99,000 in August versus consensus economist estimates of 145,000. This marked the first time ADP’s monthly reading has been below 100,000 since January 2021. (Source: Bloomberg)
Economy
- Markets ended the week with mixed performance, as we have one trading day left in the month. The S&P was up 0.6%, the Nasdaq was up 1.0%, and the small-cap Russell 2000 was down -0.1%.
- The S&P Global U.S. Manufacturing PMI fell to 47 in September from 47.9 last month, while the market expected an increase to 48.5. This marked the third consecutive month of contraction in factory activity.
- The U.S. core PCE price index, the Federal Reserve’s preferred gauge to measure underlying inflation, rose by 0.1% from the previous month, below market expectations of a 0.2% increase.
- The PCE price index in the U.S. increased 2.2% YoY in August, the lowest since February 2021. This compares to 2.5% in July and forecasts of 2.3%.
Stocks
- U.S. equities were in positive territory. Materials and Consumer Discretionary were the top performers, while Healthcare and Energy lagged. Value stocks led growth stocks, and large caps beat small caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased two basis points to 3.75% during the week.
- Global bond markets were in positive territory this week.
- High-yield bonds led for the week, followed by government bonds and corporate bonds.
