Last Week
After a nine-month gestation period, the Fed delivered a 25-basis-point rate cut. Additionally, the Fed’s updated Summary of Economic Projections (dot plot) tilted more dovish with two more cuts in 2025. Nevertheless, Fed Chair Jerome Powell’s post-decision press conference was downbeat enough to dampen the celebration. He called the 25-basis point cut a “risk management” move, pointing to the deterioration in the labor market, with inflation remaining sticky above the (aspirational) 2% target level. We continue to note the Fed’s reliance on a curious combination of backward-looking economic data and theoretical forward-looking concerns, which in 2025 resulted in restrictive monetary policy during a period of softening economic conditions, while in 2021, during the post-pandemic recovery, policy was overly accommodative.
The market did manage to rally, with the S&P 500 adding +1.2%, and the Nasdaq Composite and the Russell 2000 both jumping +2.2%. The gains were limited to the Tech, Consumer, Industrial, and Financial sectors, with slightly more declining issues than advancing issues. The Dollar, Gold, and Crude Oil, all held steady. The yield on the 10-year treasury bounced off a 5-month low and moved 8 basis points higher to 4.14%.
On the earnings front, FedEx reported strong growth, suggesting that economic activity remained healthy despite the tariff-related headwinds and restrictive monetary policies. Although he hasn’t said it recently, we are reminded of the sage advice from the Oracle of Omaha, Warren Buffett, to “never bet against America.”
On the Chicago Sports Scene, it is not clear if one should bet against the Cubs as they are on a 4-game losing streak as the playoffs approach. On a positive note, the Bears looked great at Soldier Field on Sunday, beating the Dallas Cowboys 31-14.
This Week
The economic calendar is heavy on real estate data with new home sales for August on Wednesday and existing home sales on Thursday. The housing market has been in the doldrums, with existing home sales near 15-year lows. Lower interest rates might spur activity that could provide a nice tailwind for the economy.
Also on Thursday, the U.S. Bureau of Labor Statistics will release the third and final estimate of Q2 GDP growth.
On Friday, the Bureau of Economic Analysis will release the personal consumption expenditures index for August. The core PCE price index is expected to show a 2.9% year-over-year rise, equal to the July report.
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