by Bryan Perry
August 29, 2023
Following Fed Chair Powell’s speech in Jackson Hole last Friday, stocks initially traded off but were able to grind out a positive close to finish the week, with the S&P and Nasdaq posting gains while the Dow ended fractionally lower. Powell’s preface to his concluding comment – that “we are navigating by the stars under cloudy skies” – was a bit poetic, but also confusing, considering the reams of real-time, backward-looking and forward-looking data that the Fed’s 400 PhD economists collect 24/7/365.
Some of the key economic reports of late suggest that the 11 rate hikes that began March 17, 2022 are having their effect on several areas of the economy. Existing home sales decreased 2.2% month-over-month in July. Home sales were down 16.5% from the same period a year ago. Inventory for existing homes for sale remains tight and affordability is adversely impacted by high prices and mortgage rates.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The August S&P Global Flash U.S. Composite Purchasing Managers Index (PMI) is stagnant, reflecting lower demand: “Softer demand conditions were evidenced by the first decrease in new orders at U.S. firms since February. Manufacturers faced greater challenges driving demand as new orders fell at a quicker pace, while service providers saw the fastest drop in new business since the start of the year.”
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Durable goods orders declined 5.2% (month-over-month) in July, led by a 14.3% drop in transportation equipment. Even stripping out the transportation component, business spending happened at a slow pace, evidenced by the 0.1% increase in new orders for all other non-defense capital goods.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The August University of Michigan Consumer Confidence index came in at 69.5 vs. a consensus forecast of 71.2 – suggesting that consumers are looking at curtailing spending heading into the fall. It makes me wonder who gets surveyed for these consumer confidence readings when nearly 7 out of 10 Americans have no savings to pay bills beyond 30 days, and nearly half don’t have ready cash for a small emergency.
A recent Bank rate report found that in the event of a major emergency, 68% of survey takers said they wouldn’t be able to cover their living expenses for a month if they lost their job today. Fewer than half (45%) of Americans would be able to cover a $1,000 emergency expense without turning to a credit card.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The July 11 Washington Post reported, “Businesses are starting to cut workers’ hours, forcing hundreds of thousands of people into part-time roles, in what could be an early warning sign for the economy,” adding, “The number of people who worked part time, but want to work full time, rose by 452,000 in June, the biggest jump in more than three years, according to the Bureau of Labor Statistics. In all, 4.2 million people were employed part time for economic reasons beyond their control, a 12 percent increase from the month before.” Economists suspect the latest spike in involuntary part-time work could be a harbinger of coming layoffs, especially when combined with other signs of a slowing job market.
The Washington Post report continues: “Looking at this indicator — along with two straight months of decline in Black employment — gives me a bit of pause,” said Michele Evermore, senior fellow at the Century Foundation and former deputy director at the Labor Department. “I don’t mean to be Chicken Little here, but this does tend to be a leading indicator that things are starting to slow down.”
Joshua Mask, an economics professor at Temple University, says that in every recession since 1980, a marked increase in involuntary part-time work has predicted a downturn in the coming months. U.S. households are sitting on nearly $1 trillion in credit card debt and are turning to buy-now-pay later services for groceries, as they hit credit limits with rates averaging 24% for outstanding credit card debt. (“Americans using ‘buy now, pay later’ apps to contend with high grocery prices” Washington Post, July 12, 2003.)
This week, a tsunami of economic data will roll over the news tape, moving both bond and stock prices. Data on inflation, jobs, housing, retail, wholesale, construction, and manufacturing will highlight a back-end loaded week. Below is a data table for referencing what to expect compared to what will be reported.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As we head into an extended Labor Day weekend, it will be nice to put August in the rear-view mirror. August is often a tough month for the market – and this August is no exception, as bond yields spiked to multi-year highs – but if the economic calendar is kind to us this week, and bond yields begin to recede, September could bring about some better conditions on Wall Street.
Other than celebrating the contributions and achievements of 155 million working men and women currently in our U.S. Labor Force, let me close with a few other fun facts about Labor Day:
- Oregon was the first state to declare Labor Day as an official holiday in 1887.
- Congress passed the Act in 1894 making the first Monday of September a national Labor Day.
- Besides kicking off the school year, and the college and NFL football seasons, Labor Day marks the opening of the first Waffle House. (I know this because my grandsons love the Waffle House. It’s open 24/7, 365 days per year. Don’t ask me why. I’m old fashioned. I prefer Silver Diner!)
All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Wall Street Likes to Add Volatility to the August Doldrums
Income Mail by Bryan Perry
Stocks Are Looking to Make Peace with The Bond Market
Growth Mail by Gary Alexander
Jerome Powell’s “Dream Speech” at Jackson Hole, 2025
Global Mail by Ivan Martchev
The Stock Market Reaches Another Fork in the Road
Sector Spotlight by Jason Bodner
Why Good Stocks Go Down in Price…on Good News
View Full Archive
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Bryan Perry
SENIOR DIRECTOR
Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.
Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry
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