The Independent Market Observer

What Mattered This Week? Consumers, Economic Growth, and the Fed

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Jul 28, 2023 2:22:07 PM

and tagged Commentary

Leave a comment

consumersThere was a lot more data this week than last—and all of it was good. Everything we are seeing suggests that the economy is still growing, despite the headlines and fears. While there are certainly risks out there, the data is showing a resilience that no one expected, and that is a good sign for the future.

Good News on Consumers

The most important data this week was a significant jump in consumer confidence. The Conference Board survey came in much higher than both last month and expectations, and it is now at a two-year high. As you know, this is one of the key metrics I follow, as we don’t get a recession when people feel good—and they do.

Beyond feeling good, they are able to spend more because they are making more money. Personal income rose by 0.3 percent in June, driving spending up even more.

Economic Growth Continues

June was typical of the last quarter, as economic growth clocked in at 2.4 percent, faster than the first quarter and well above expectations. Growth has actually accelerated so far this year, which gives us a very solid foundation for the next couple of quarters. Even with that growth, personal consumption expenditures (PCE) inflation continued to drop, suggesting we could see further drops even as growth continues.

Fed Raises Rates

The Fed, however, is not convinced. As expected, it raised rates by another quarter-point at its regular meeting this week. The real takeaway, though, was that the Fed’s staff no longer expects a recession this year. So even the Fed, which is raising rates to slow the economy, doesn’t expect anything more than a slowdown. Despite the headwind of higher interest rates, the Fed is noting the same things we have here, with higher employment and spending, and belatedly drawing the same conclusions.

A Positive Week

That is what mattered this week: lots of good data and even the Fed shifting away from a recession call. It’s a nice send-off to a summer weekend.

Have a great one!


Subscribe via Email

Crash-Test Investing

Hot Topics



New Call-to-action

Conversations

Archives

see all

Subscribe


Disclosure

The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.

Member FINRASIPC

Please review our Terms of Use

Commonwealth Financial Network®