Happy Labor Day! The Dow finished a quiet week of trading with a roughly 1% gain overall and eclipsed a record high set in mid-July. The S&P 500 finished fractionally higher, ending up less than a percentage point below its mid-July record. The NASDAQ fell around 1%. As for August as a whole, despite a rough initial week, the S&P 500 recovered to finish with a gain of more than 2%. That’s its ninth positive month out of the past ten. The Dow added nearly 2% while even the NASDAQ finished almost 1% higher. The Nasdaq finishing the month positive is impressive when you consider on August 5, it had dropped as much as 10.7% from its July 31 closing level. Labor Day means back to school for millions of kids. I have broken down this week’s update using quotes from the Rodney Dangerfield classic Back to School.
“No more!… I feel like I just gave birth…. to an accountant.”
We got two more numbers this week. It seems like every week the market we are talking inflation figures. Inflation across the 20 countries that use the euro currency fell to the lowest level in about three years. The eurozone’s inflation rate recorded an annual rate of 2.2% in August compared with 2.6% in July. Inflation is still dropping even two months after the ECB cut its key interest rate for the first time since 2019. Here in the U.S. the Fed’s mission is not yet accomplished on the price-stability front. The Fed’s preferred measure of inflation, the core personal consumption expenditures price index (PCE), increased 0.2% from June, the third mild increase in a row, leaving the annual pace unchanged at 2.6% Neither of these numbers change the market expectation that the Fed will start with rate cuts in September.
“Yeah, I took out an English teacher. That didn’t work out at all. I sent her a love letter… She corrected it!”
We got another correction this week. This time it was the GDP figure. The U.S. economy expanded at a faster rate in this year’s second quarter than originally estimated. The government on Thursday reported that GDP grew at a 3.0% annual rate, up from an initial estimate of 2.8% made in late July. The revision was driven by an increase in personal spending. The upward GDP revision highlighted that the economy is not contracting, instead it has grown at an above-trend pace.
“With the shape I’m in you could donate my body to science fiction”
How do people really feel about the health of our economy? Gold futures pushed their record levels higher for the fifth week in a row, topping $2,560 per ounce on Friday morning. Friday afternoon’s price of around $2,535 was up about 23% year to date. What this tells me is that investors don’t believe the economy is in as good shape as the GDP figures suggest. The move higher in gold this week came even as U.S. consumer sentiment rose for the first time in five months. A rising gold price has historically been indicative of the economic uncertainty investors feel. The last time gold spiked like this was in 2020 during Covid.
If you’d like to speak about your investments or your plan, my calendar link is below and you can schedule a phone or zoom appointment.
