It has been a joy to see many of you at our recent Client Welcome Back receptions! Your presence is a testament to the sense of community we deeply value. We look forward to welcoming you this season at one of our forthcoming events, including seminars, client dinners and more.
When examining the current state of the economy, it’s evident that the U.S. consumer is facing significant challenges. Despite the Fed maintaining high interest rates, core inflation remains stubbornly elevated. This is largely because of persistently high rental prices, putting additional financial pressure on consumers. A combination of rising mortgage rates and gas prices, at their highest in two decades, adds further strain. We anticipate additional financial hardship due to the resumption of student loan repayments combined with dwindling pandemic savings. Consequently, credit card delinquencies are skyrocketing, and tax withholdings are at an all-time low—signs that consumers have current cash needs. While a short-term remedy, this trend portends the U.S. consumer no longer has the discretionary income necessary to drive economic growth.
The economic strain isn’t limited to households; it’s affecting the broader economy as well. Companies appear more hesitant to hire, as shown by the recent drop in the Job Openings and Labor Turnover Survey (JOLT) rate. While this may reflect the Federal Reserve’s finally seeing some success in loosening the tight labor market, it also suggests an overall economic slowdown. In fact, a decline in temporary-help employment has historically preceded every recession since 1990.
We therefore believe the odds of the Fed raising rates in November are low. The ongoing crisis in the Middle East renders a Fed rate hike in November even more improbable. The Fed may decide to permanently halt its recent rate hiking campaign, marking July as its last increase. Given recessions historically follow about 11 months after the Fed’s final rate increase, we could see a recession in the latter half of 2024. Furthermore, the recent ‘un-inversion’ of the yield curve since July, with the spread between the 2-year and 10-year yields narrowing from 1.1 percentage points to 0.29 points, indicates that a recession is getting closer. The Leading Economic Index® (LEI), which measures leading economic indicators, declined once again in September, also flashing warning signs of a recession…
This commentary is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The views expressed are those of the author(s) as of the date of publication and are subject to change without notice. Past performance is not indicative of future results.
This material may have been prepared using data and analysis from a variety of sources, including but not limited to: Bloomberg, FactSet, Morningstar, S&P Global, Moody’s, Refinitiv, Capital IQ, CRSP, FRED, IMF, World Bank, OECD, and other third-party research providers. Additionally, portions of this content may have been generated or reviewed with the assistance of artificial intelligence tools, including OpenAI’s large language models or similar technologies. While we believe these sources to be reliable, we do not guarantee their accuracy or completeness.
Moran Wealth Management is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. For more information about our services, fees, and potential conflicts of interest, please refer to our Form ADV Part 2A, available upon request.
Moran Monthly Digest: Oct. 2023
Dear Clients,
It has been a joy to see many of you at our recent Client Welcome Back receptions! Your presence is a testament to the sense of community we deeply value. We look forward to welcoming you this season at one of our forthcoming events, including seminars, client dinners and more.
When examining the current state of the economy, it’s evident that the U.S. consumer is facing significant challenges. Despite the Fed maintaining high interest rates, core inflation remains stubbornly elevated. This is largely because of persistently high rental prices, putting additional financial pressure on consumers. A combination of rising mortgage rates and gas prices, at their highest in two decades, adds further strain. We anticipate additional financial hardship due to the resumption of student loan repayments combined with dwindling pandemic savings. Consequently, credit card delinquencies are skyrocketing, and tax withholdings are at an all-time low—signs that consumers have current cash needs. While a short-term remedy, this trend portends the U.S. consumer no longer has the discretionary income necessary to drive economic growth.
The economic strain isn’t limited to households; it’s affecting the broader economy as well. Companies appear more hesitant to hire, as shown by the recent drop in the Job Openings and Labor Turnover Survey (JOLT) rate. While this may reflect the Federal Reserve’s finally seeing some success in loosening the tight labor market, it also suggests an overall economic slowdown. In fact, a decline in temporary-help employment has historically preceded every recession since 1990.
We therefore believe the odds of the Fed raising rates in November are low. The ongoing crisis in the Middle East renders a Fed rate hike in November even more improbable. The Fed may decide to permanently halt its recent rate hiking campaign, marking July as its last increase. Given recessions historically follow about 11 months after the Fed’s final rate increase, we could see a recession in the latter half of 2024. Furthermore, the recent ‘un-inversion’ of the yield curve since July, with the spread between the 2-year and 10-year yields narrowing from 1.1 percentage points to 0.29 points, indicates that a recession is getting closer. The Leading Economic Index® (LEI), which measures leading economic indicators, declined once again in September, also flashing warning signs of a recession…
To continue reading, please download the full Moran Monthly Digest here.
This commentary is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The views expressed are those of the author(s) as of the date of publication and are subject to change without notice. Past performance is not indicative of future results.
This material may have been prepared using data and analysis from a variety of sources, including but not limited to: Bloomberg, FactSet, Morningstar, S&P Global, Moody’s, Refinitiv, Capital IQ, CRSP, FRED, IMF, World Bank, OECD, and other third-party research providers. Additionally, portions of this content may have been generated or reviewed with the assistance of artificial intelligence tools, including OpenAI’s large language models or similar technologies. While we believe these sources to be reliable, we do not guarantee their accuracy or completeness.
Moran Wealth Management is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. For more information about our services, fees, and potential conflicts of interest, please refer to our Form ADV Part 2A, available upon request.