As the Federal Reserve prepares to cut short-term interest rates for the first time in four and a half years, the U.S. economy remains remarkably strong, with continued low unemployment, decent GDP growth and moderating inflation. Fed Chair Powell’s comments at the August Jackson Hole confab all but guaranteed a 25 basis point cut when the FOMC meets next on September 18th. Despite inflation still running above “target”, many economists are suggesting that current Fed policy is too restrictive and risks triggering a hard landing for the U.S. economy.
Unemployment in July edged up to 4.3%, although weekly Initial Jobless Claims held steady on the month at around 230k. Nonfarm payrolls grew by +114k in July, missing the forecast for +175k, while June’s number was revised down to +179k versus the previously reported +206k gain. Average Hourly Earnings rose +0.2% in July, and are up +3.6% YoY, while the Labor Force Participation Rate came in at 62.7%
While the BLS’s annual jobs number revision suggested 810k fewer jobs were created over the past year, the 2nd revision to Q2 GDP showed the economy grew at a better than expected 3.0% annualized rate, versus the 2.8% reported in the first reading. The U.S. consumer remains strong as July’s Retail Sales reports came in better than expected across the board, while Consumer Confidence in August rose above forecast. The housing markets remains solid with demand continuing to exceed supply.
Prices continued to moderate at both the wholesale and retail level in July. The Producer Price Index rose just +0.1% MoM (+2.2% YoY), while ex food and energy, PPI was flat for July (+2.4% YoY). At the consumer level, prices gained +0.2% MoM (+2.9% YoY), while Core CPI also gained +0.2% MoM, but rose +3.2% YoY. The PCE Price Index gained +0.2% in July, and is now up +2.5% YoY, closer to the Fed’s target of 2.0% inflation.
All of the above data, along with the belief among many that Fed policy is far too restrictive, suggest the FOMC will cut 25 bps in September, followed by another 50 basis points or so by year-end. Chair Powell recognizes the political fallout from deviating from script ahead of the November elections, so we don’t anticipate many surprises here. In our view, as long as the U.S. consumer holds up, our base case for a soft economic landing will remain intact.
To read further about domestic and international equity, fixed-income, and alternative investments, please open the full paper below:
Nottingham Advisors offers both institutional and individual clients experience, sophistication, and professionalism when helping them achieve their goals. With over 40 years of serving Western New York and clients in more than 30 states, Nottingham tailors each solution to fit the specific needs of each client.
For more information about Nottingham’s offerings, visit www.nottinghamadvisors.com or call 716-633-3800.
Nottingham Advisors, Inc. (“Nottingham”) is an SEC registered investment adviser located in Amherst, New York. Registration does not imply a certain level of skill or training. Nottingham and its representatives are in compliance with the current registration and notice filing requirements imposed upon SEC registered investment advisers by those states in which Nottingham maintains clients. Nottingham may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. For information pertaining to the registration status of Nottingham, please contact Nottingham or refer to the Investment Advisor Public Disclosure Website (www.adviserinfo.sec.gov). Any subsequent, direct communication by Nottingham with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.
This newsletter is limited to the dissemination of general information pertaining to Nottingham’s investment advisory services. As such nothing herein should be construed as the provision of personalized investment advice. The information contained herein is based upon certain assumptions, theories and principles that do not completely or accurately reflect your specific circumstances. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Adhering to the assumptions, theories and principles serving the basis for the information contained herein should not be interpreted to provide a guarantee of future performance or a guarantee of achieving overall financial objectives. As investment returns, inflation, taxes and other economic conditions vary, your actual results may vary significantly. Furthermore, this newsletter contains certain forward-looking statements that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their dates. As such, there is no guarantee that the views and opinions expressed in this article will come to pass. This newsletter should not be construed to limit or otherwise restrict Nottingham’s investment decisions.
This newsletter contains information derived from third party sources. Although we believe these third party sources to be reliable, we make no representations as to the accuracy or completeness of any information prepared by any unaffiliated third party incorporated herein, and take no responsibility therefore. Some portions of this newsletter include the use of charts or graphs. These are intended as visual aids only, and in no way should any client or prospective client interpret these visual aids as a method by which investment decisions should be made. We have provided performance results of certain market indices for illustrative purposes only as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any benchmark index. A description of each index is available from us upon request.
Investing in the stock market involves gains and losses and may not be suitable for all investors. Past performance is no guarantee of future results.
For additional information about Nottingham, including fees and services, send for our Disclosure Brochure, Part 2A or Wrap Brochure, Part 2A Appendix 1 of our Form ADV using the contact information herein.
