Economic Update 11-17-2025

Economic data remained sparce last week, but as the federal government shutdown ended, coming weeks should see a more normal report flow.

Equities were mixed, with foreign stocks seeing gains, offset by declines in U.S. large cap growth and small cap. Bonds fell back as yields rose across the U.S. Treasury curve. Commodities gained, again led by precious metals, while oil was little-changed.

U.S. stocks were mixed on the week, with large cap indexes up slightly, while the Nasdaq and small cap groups fell back. Early Monday, stocks saw gains as hopes rose over the weekend for a short-term resolution to the government shutdown, which would offer a brief holiday respite. The bill was signed by late Wed., which funds the government through Jan. 30, and included controversial funding for SNAP food assistance programs. However, the longer-term issue of health care subsidies, which is the sticking point between the two parties, has yet to be addressed. Health insurance premiums are expected to soar again in 2026, continuing a pace that ramped up during the pandemic. By Thursday, the lack of available data and depth and length of the government shutdown weighed on investors, fearing additional weakness in the quarter. This was in addition to some diminished excitement for the buoyant 2025 theme of artificial intelligence, as valuations have continued to run on the higher side of consensus expectations for near-term revenues, albeit with still imperfect visibility on AI benefits flowing through to the economy, and impact on labor markets. Overall, we’ve seen a negative reversal for stocks referred to as ‘momentum,’ ‘high beta,’ and ‘low quality,’ which had rallied so sharply since April’s ‘Liberation Day.’ By contrast, stocks with higher-quality fundamentals have tended to lag in relative terms, which is the opposite of their stronger results over longer-term time periods.

Economic Update 11-10-2025

Economic data was again limited due to the federal government shutdown, but included improvements in ISM services and ADP employment, while ISM manufacturing and consumer sentiment fell back to varying degrees.

Equities were largely down around the world, led by a pullback in the technology group. Bonds were flat with little change in Treasury yields. Commodities were also relatively flattish for the week, and oil fell slightly.

U.S. stocks experienced on off-week, as technology experienced the bulk of the declines, down around -4% (led by down Nvidia, Microsoft, and Salesforce), followed by communications. On the positive side, gains were seen in energy, health care, and financials.

Economic Update 11-03-2025

Economic data from the U.S. government remained on hold, while private sources showed housing prices flattening, and continued challenged consumer sentiment. The Federal Reserve cut interest rates by a quarter-percent, as markets already expected.

Equities were mixed globally, with gains and losses dispersed by region. Bonds were largely down in the U.S. upon higher interest rates, and mixed abroad, with a stronger dollar. Commodities were also mixed, with oil prices little-changed.

U.S. stocks saw gains in the large cap area, while small caps fell back, which largely appeared to be interest rate related. were boosted by what seemed to be progress on a U.S.-China trade agreement and loosening of tensions at the ASEAN Summit in Malaysia. By Thursday, a 1-year trade truce was announced. While temporary, this included a reduction of U.S. tariffs on Chinese imports, as well as China’s suspension of rare earth mineral export controls, and their resumed purchasing of U.S. agricultural exports, particularly soybeans. Mid-week, the FOMC decision was seen as a positive, which reversed a bit as Chair Powell noted that a December cut was “far from certain,” pulling back on dovishness a bit. However, by the end of the week, despite strong revenues (from firms like Meta), hints of strong spending on AI for the next quarter and into 2026 had investors on edge a bit with returns on investment yet to be determined, although sentiment for the AI concept remains one of the primary drivers of sentiment. The U.S. government remains closed, now having reached a full month, and threatening the record 35 days from the 2018-19 shutdown, and is now assumed to perhaps trim a full percent off of Q4 GDP growth, although that could be made up in Q1-2026.

Economic Update 10-27-2025

Economic data remained sparce as the federal government shutdown continued, with the exception of CPI inflation, which remained high, but somewhat cooler than expected. Private sources included gains in manufacturing and services PMI, as well as existing home sales, while weakness continued in consumer confidence.

Equities rose globally, led by the U.S. and emerging markets. Bonds fared positively in the U.S. credit segment, but lagged internationally with a stronger dollar. Commodities were generally higher with additional Russian sanctions reducing potential crude oil supplies.

U.S. stocks started the week strongly, with hopes of both an end to the U.S. government shutdown (which didn’t happen), as well as stronger chances of progress between the U.S. and China, via expected upcoming meetings. By Friday, the delayed September U.S. CPI report came in a bit less inflationary than expected, which raised chances of the Federal Reserve continuing their easing plan this coming week, and perhaps again in December.

Economic data remained sparce with the U.S. government shutdown continuing beyond its second week.

Stocks rebounded upward last week as U.S. earnings season began. Bonds also saw gains as interest rates fell, helped internationally by a weaker dollar. Commodities rose a bit due to gains in precious metals offsetting declines in energy.

U.S. stocks fared positively for the week, reversing a sharply negative prior week. Markets opened the week positively after the Israel-Gaza ceasefire news, and U.S. administration comments over the weekend that U.S.-China trade tensions “will all be fine,” which neutralized some of the sharp negativity and near -3% drop in the S&P the prior Friday. By Friday, the administration noted that high tariffs on China were “not sustainable.” The back and forth around U.S.-China trade relations continued, while a dovish Federal Reserve, and continued positive sentiment around AI moved prices higher.

By sector, gains were led by communications, technology, consumer discretionary, and consumer staples, each up around 2% or more for the week. Financials were weakest, showing minimal gains, as some regional banks noted some concerns over weakening credit quality (noting fraud in some cases), including two bankruptcies in the sub-prime auto loan segment, which offset better-than-expected earnings results from bigger banks earlier. Time will tell if this problem intensifies and becomes a market concern, although loan delinquencies (especially in the lower-income segment) have risen. Real estate also fared well, up over 3%, as yields declined a bit and double-digit gains in the industrial segment.

Economic Update 10-06-2025

Economic data included an improvement in the ISM manufacturing report, although it stayed in contraction, while ISM services fell to neutral. Several reports weren’t published because of the Federal government shutdown, including the closely-watched employment situation report.

Equities saw gains last week globally, led by international markets over U.S. Bonds fared positively as well, as assumed plans for Federal Reserve easing and the government shutdown pulled down yields. Commodities were mixed, with strength in metals and weakness in energy.

U.S. stocks fared positively, despite the rising odds of a government shutdown at quarter-end (and reality on Oct. 1), being offset by weaker labor data, which perpetuated the assumption of another Federal Reserve cut late in October. Artificial intelligence sentiment and momentum also remained high. By sector, gains were strongest in health care, followed by utilities and technology. In health care, up 7%, this was led mostly by Pfizer, after an agreement between the firm and the U.S. administration to lower prescription drug prices in the Medicaid program in exchange for tariff relief. Declines were most pronounced in energy and communications, with the latter being due to falling oil prices. Real estate ticked up slightly for the week, with declines in interest rates. Earnings results for Q3 will be rolling out next week, which could take some of the attention away from other macro events.

Economic Update 10-06-2025

Economic data included an improvement in the ISM manufacturing report, although it stayed in contraction, while ISM services fell to neutral. Several reports weren’t published because of the Federal government shutdown, including the closely-watched employment situation report.

Equities saw gains last week globally, led by international markets over U.S. Bonds fared positively as well, as assumed plans for Federal Reserve easing and the government shutdown pulled down yields. Commodities were mixed, with strength in metals and weakness in energy.

U.S. stocks fared positively, despite the rising odds of a government shutdown at quarter-end (and reality on Oct. 1), being offset by weaker labor data, which perpetuated the assumption of another Federal Reserve cut late in October. Artificial intelligence sentiment and momentum also remained high. By sector, gains were strongest in health care, followed by utilities and technology. In health care, up 7%, this was led mostly by Pfizer, after an agreement between the firm and the U.S. administration to lower prescription drug prices in the Medicaid program in exchange for tariff relief. Declines were most pronounced in energy and communications, with the latter being due to falling oil prices. Real estate ticked up slightly for the week, with declines in interest rates. Earnings results for Q3 will be rolling out next week, which could take some of the attention away from other macro events.

Economic Update 9-29-2025

Economic data included a revision higher for Q2 U.S. economic growth, as well as strength in durable goods orders and new home sales. Jobless claims have stabilized after a few unusual weeks, including some fraudulent activity. Consumer sentiment remained challenged, with a good degree of pessimism about the economy and labor markets.

Equities were mixed, with declines in the U.S. and emerging markets, while Europe saw gains. Bonds were generally down as interest rates rose along with strong economic results and inflation. Commodities also gained, largely coinciding with crude oil.

U.S. stocks declined on net last week, led downward by growth stocks and small cap, in a reversal of the prior few weeks. By sector, energy led the way, up 5% along with a spike in oil prices, as well as utilities, while materials lagged with a decline of a few percent, in addition to consumer discretionary and consumer staples. The week featured a variety of unusual headlines, which included a large investment from Nvidia in OpenAI, and the U.S. administration’s involvement in a spin-off of TikTok’s U.S. operations from its Chinese operator for $14 bil. Early in the week, tech firms especially tried to interpret implications of the administrations of the new H-1B visa fee of $100,000, which has a strong impact on technology company employees, primarily from India. However, confusion continues around who is responsible for paying the fee, whether or not it’s a one-time charge, and how it would affect current U.S. workers on visa. A 100% tariff on branded pharmaceuticals was announced (except for the EU and Japan), for any firm not planning a manufacturing facility in the U.S., as well as new levies on heavy trucks, (upholstered) furniture, and kitchen cabinets.

Economic Update 9-22-2025

Economic data include the Federal Reserve reducing policy short-term interest rates by a quarter-percent, as expected. Gains were seen in retail sales and industrial production, regional manufacturing surveys saw mixed results, while housing starts and homebuilder sentiment continued to weaken.

Equities rose in the U.S. and internationally for the most part, buoyed by easier central bank policy. Bonds were mixed to lower, along with higher longer-term rates. Commodities declined in several sectors.

U.S. stocks gained last week, with solidified hopes for a Federal Reserve rate cut this coming week, as well as continued optimism about the potential for artificial intelligence, which has been the broad theme driving much of the market’s upward movement. Early in the week, hopes for a ‘jumbo’ (0.50%) Fed rate cut in Sept. elevated the mood, with that hope driven by weaker labor markets. (This was particularly driven home by revisions for the year ended March 2025 showing that 911k fewer jobs were created than first assumed.) However, the Fed usually has a high bar for extreme easing moves, especially if inflation remains at current elevated levels.

Economic Update 9-15-2025

Economic data released last week included producer price inflation coming a bit flatter than expected, while consumer price inflation inched higher in a variety of areas.

Equities gained around the world, notably by the most in emerging markets. Bonds also saw gains as interest rates fell for longer-term maturities. Commodities saw positive returns as well, led by segments other than energy.

U.S. stocks gained last week, with solidified hopes for a Federal Reserve rate cut this coming week, as well as continued optimism about the potential for artificial intelligence, which has been the broad theme driving much of the market’s upward movement. Early in the week, hopes for a ‘jumbo’ (0.50%) Fed rate cut in Sept. elevated the mood, with that hope driven by weaker labor markets. (This was particularly driven home by revisions for the year ended March 2025 showing that 911k fewer jobs were created than first assumed.) However, the Fed usually has a high bar for extreme easing moves, especially if inflation remains at current elevated levels.

Economic Update 9-08-2025

On a holiday-shortened week, economic data included stronger ISM services and manufacturing PMI surveys, while the August employment situation report came in again weaker than expected.

Equities experienced gains worldwide to varying degrees, largely upon hopes of easier Federal Reserve policy. Bonds gained as yields fell in response to weaker jobs data. Commodities were mixed to lower, with higher supplies in a variety of goods.

U.S. stocks were up slightly, with growth and small cap again outperforming the broader S&P 500. Although it didn’t appear to affect markets too much, during the Labor Day weekend, the Court of Appeals for the Federal Circuit affirmed the Court of International Trade’s May ruling blocking the Trump tariffs placed under the IEEPA (which account for about half of the tariffs placed this year, or 8 percentage points). However, these could remain in place based on acts from the 1960s and 1970s on national security grounds, unfair trade practices, or via persistent trade deficits. However, no changes have been put into effect until next month, or a judgment or other notice comes from the Supreme Court, which could delay things further.

By sector, communications and consumer discretionary led with gains of several percent for the week, while most other areas were flat or experienced declines, led by energy and financials. Real estate was down a fraction of a percent. Within communications, shares of Alphabet soared by over 10% as a federal judge ruled that Google wouldn’t be forced to divest its popular Chrome internet browser to satisfy antitrust concerns.

Economic Update 9-02-2025

Economic data for the week included U.S. GDP growth for the 2nd quarter being upgraded a bit, and continued growth in personal income and spending. On the weaker side were durable goods orders, home prices, and consumer sentiment.

Equities were flat in the U.S. but fell several percent overseas. Bonds were little-changed for the week. Commodities rose a bit across the board, led by gold.

U.S. stocks ended slightly lower in a pre-Labor Day light trading week that many consider to be the end of the summer season. (As volumes have tended to pick up right after the holiday, often with less optimistic sentiment in the month of September, at least traditionally.) The President’s announcement that he would be firing Fed Governor Cook led to concerns over the Fed’s reputation, as noted earlier, but not to a major degree. The big earnings news of the week was Nvidia, which reported over-50% revenue growth year-over-year, which is exceptional by most any metric, yet underwhelmed investors a bit. In other technology news, it was announced that the U.S. government will be taking a 10% equity stake in Intel, in efforts to boost domestic chip manufacturing (which is currently dominated by Taiwan, in a geopolitically precarious position). By Friday, a stronger PCE inflation report soured the mood a bit, as it pointed to price pressures making their way through the system. By sector, energy stocks saw gains of several percent, followed by financials and communications, while defensives utilities and consumer staples lost several percent. Real estate stocks were little changed.

Economic Update 8-25-2025

Economic data included gains in existing home sales and housing starts, while the index of leading economic indicators continued to move in a negative direction. Fed Chair Powell’s comments at their Jackson Hole symposium pointed to higher chances of a September interest rate cut.

Equities gained globally, with hopes for lower U.S. policy yields, with an especially strong week for U.S. small cap. Bonds gained as yields fell across the Treasury curve. Commodities also saw price gains broadly in a variety of segments.

U.S. stocks saw moderate gains, with flattish returns most of the week, and investors waiting for Friday’s keynote speech from Fed Chair Powell at their annual Jackson Hole Symposium, where a variety of economic and monetary policy matters are discussed. The hope (from markets anyway) was for more concrete hints of September rate cuts. The speech was seen as dovish by markets, which pushed stocks higher by over a percent. Specifically, he noted that the underlying outlook and “shifting balance of risks may warrant adjusting our policy stance,” and that lower immigration “suggests that downside risks to employment are rising,” and potential risks could materialize quickly if they did occur.

Economic Update 8-20-2025

Economic data for the week included inflation data that came in more robustly than expected, especially on the producer side. Positive news came from a gain in retail sales, offsetting a drop in industrial production and weaker consumer sentiment.

Equities gained around the world, with similar gains in the U.S. and abroad. Bonds were flattish domestically, with mixed results internationally. Commodities saw gains in agriculture offset by declines in energy and precious metals.

 U.S. stocks gained with sentiment that appeared to be driven by rising hopes for a Fed rate cut in September, along with comments from the U.S. Treasury Secretary, noting that Fed funds “should probably be 150, 175 basis points lower.” By sector, health care, communications, and consumer discretionary led with gains of several percent, while defensive utilities and consumer staples lagged with declines of just over a half-percent. With perceived rate impacts, small caps outperformed large caps by the widest weekly margins in several months.

Economic Update 8-11-2025

Economic data was light, and included a slight decline in ISM services, toward neutral, while jobless claims continued to tick up a bit.

Equities gained worldwide last week, with international outpacing U.S. by a bit. Bonds were mixed, with foreign bonds benefitting from a weaker U.S. dollar. Commodities saw gains in metals, but weaker energy prices due to both supply and demand concerns.

 U.S. stocks saw gains for the week, rebounding from a sharply negative prior week. By sector, gains were led by technology (largely from Apple, upon announcing U.S.-based manufacturing investments) and consumer discretionary (largely from Tesla), each up around 4%, followed by communications and consumer staples. Energy and health care saw declines of nearly a percent (with the latter exclusively due to Eli Lilly, related to GLP-1 product sensitivity). Real estate was down just slightly for the week.

Stocks were held back a bit early in the week by the poor ISM services reading, and continued investor focus on the poor labor market report the prior week, which made a Fed rate cut in Sept. even more of a foregone conclusion (even though it was anyway). In fact, there was some chatter as to whether the cut would be -0.25% or -0.50%, as seen in the Sept. meeting a year ago. There are several more data points to come out between now and then, but the speed of labor market slowing is certain to be a key Fed discussion point. Also, following the resignation of Fed Gov. Kugler late the prior week, speculation was growing around a possible replacement, who could vote as early as the Sept. meeting. The next Fed chair must be selected from a member of the board at that time, so a nominee could represent a current favorite for that role. (By Thursday, Stephen Miran, the current chair of the Council of Economic Advisors, was announced as her replacement for at least the remainder of her term ending Jan. 2026. This was seen as a move toward the dovish side, in line with what the administration had intended.)

Economic Update 8-06-2025

Economic data included the Federal Reserve keeping interest rates steady for another meeting. On the positive side, U.S. GDP saw strong growth for the second quarter (albeit with caveats), and consumer sentiment improved. However, the employment situation report was far weaker than expected, with several downward revisions, job openings declined, and the pace of home price appreciation continued to decelerate.

Stocks fell back last week globally along with more U.S. tariff announcements and negative labor market data. Bonds fared well domestically, as rates fell, but foreign bonds were mixed as the dollar strengthened. Commodities were also mixed as oil prices rose but fell in other groups.

U.S. stocks lost ground last week, resulting from trade news and a weak labor market report. Markets started positively on Monday with the weekend news of a US-EU trade deal, where the EU accepts tariffs of 15% but levies a 0% rate in return, as well as agreements to purchase American energy and defense supplies. Though, by Thursday evening, the President signed an executive order to raise tariffs on most trading partners, to take effect Aug. 7, which markets took poorly on Friday. Otherwise, updated tariffs included Canada (25% to 35%, on non-treaty items), South Korea (15%), India (25%), Brazil (50%), certain copper products (50%, but not on all), several other countries at 30% (such as Switzerland), while keeping a 10% baseline on everyone else. This also included a 90-day reprieve for Mexico, allowing for further analysis and negotiations. The overall tariff rate picture remains convoluted, with markets assuming twists and turns as negotiated announcements are made.

Economic Update 7-28-2025

Economic data for the week included strength in S&P services PMI, and new home sales; these offset weaker results in S&P manufacturing PMI, durable goods orders, existing home sales, and the well-watched index of leading economic indicators.

Equities saw gains around the world, led by Japanese stocks. Bonds also fared positively, as interest rates declined slightly, with foreign bonds led by a weaker dollar. Commodities fell back as oil and natural gas prices declined.

U.S. stocks saw another week of gains, following decent corporate earnings on net, and the U.S. administration’s trade agreements with Japan, Indonesia, and the Philippines, in addition to negotiations with the European Union ahead of the Aug. 1 deadline for 30% tariffs on the latter. (The European discussions appeared to be completed over the past weekend, resulting in a 15% tariff deal. The U.S. talks with China continue, with reports of another 3-month extension to provide additional time for a potential deal.)

Every sector ended in the positive last week, led by health care up over 3%, followed by materials, industrials, and communications, up over 2%. Consumer staples was the laggard, when ended roughly flat for the week. Real estate also gained over 2% along with lower long-term interest rates.

Economic Update 7-21-2025

Economic data included gains in industrial production, retail sales, housing starts, and consumer sentiment. Inflation came in a bit higher than expected on the consumer side, surpassing the minimal change in producer inflation.

Equities were mixed globally, with gains in the U.S. and emerging markets offset by declines in foreign developed. Bonds were little-changed, along with minimal change in yields. Commodities were also mixed, as crude oil prices fell back.

U.S. stocks experienced a positive week, as positive economic data and in-line inflation were coupled with a decent start to earnings season that outweighed continued trade uncertainty. As the week began, markets began to digest the potential 30% tariff on the EU, which would put a significant strain on European growth, but perhaps not as much as the headline figure suggests.

By sector, gains were strongest in technology (helped by Nvidia receiving permission to sell AI chips to China) and utilities; these were offset by declines in energy, healthcare, and materials. Real estate also gained a fraction of a percent. Earnings season for Q2 began to ramp up, with 12% of firms now having reported, per FactSet, and higher-profile early positive surprises from JP Morgan Chase and Citigroup in the financial sector, as well as Pepsi and Netflix. Of firms reporting, nearly 85% have shown positive revenue and/or earnings surprises, with the blended earnings growth rate having risen to 5.6% from just under 5% at quarter-end and again led by communication and technology. With a substantial number of reports in the coming weeks, expected growth remains just below long-term trend levels.

Economic Update 7-14-2025

In a strangely light week for economic news, jobless claims were mixed, while the FOMC minutes from the June meeting pointed to a continued ‘wait and see’ mindset around potential tariff inflation impacts and labor market conditions.

Equities were mixed globally, with the U.S. generally faring best. Bonds were lower as interest rates ticked up. Commodities were also mixed, with oil and gold higher, while other areas declined.

U.S. stocks started weaker and weren’t able to gain any ground through the week. Tariff news again dominated other news, in a week of few economic releases. By sector, energy and utilities led the way with gains, while losses were concentrated in financials, communications, and consumer staples. Real estate also lost a bit of ground for the week.

The July 8 deadline from the 90-day Apr. 8 ‘Liberation Day’ featured an extension until Aug. 1, which is not that far off. Treasury Secretary Bessent noted that countries will receive an extension if they continue to negotiate in good faith, and the government wants to see negotiations wrapped up by Labor Day. At the same time, the President announced several updated tariffs, including 25% on South Korea and Japan, as well as varying rates on Canada and several emerging nations. This included a proposed 50% tariff on copper, as well as 50% on Brazil, tied to legal proceedings there related to former President Bolsonaro.

Economic Update 7-7-2025

In a holiday-shortened week, economic data included improvement in both ISM manufacturing and services surveys. The monthly employment situation report was positive at the surface, but skewed by a few categories within it, muting the impact.

Equities experienced gains in the U.S., largely due to tax legislation passing, while international stocks were mixed. Bonds fared positively, as credit spreads tightened. Commodities gained with higher prices in oil and precious metals.

U.S. stocks saw gains last week, with little trade news and unsurprising economic data for the most part, but investors were watching the progress of the Congressional budget reconciliation bill, which was passed by the Senate on Tues. and the House Thurs. afternoon. This seemed to help equity sentiment along with the decent jobs report that continues to show tariff fears haven’t done too much damage to the economy (and earnings). Despite little trade news, the 90-day tariff pause is due to expire this coming week on Jul. 9, with market expectations for an extension. Stock earnings report for Q2 will begin mid-month, with an expected deceleration from the robust Q1 pace.

Economic Update 5-19-2025

Economic news last week included inflation metrics showing improvement on both a consumer and producer level. Also, data included slightly higher retail sales and housing starts, unchanged industrial production, but weaker consumer sentiment that continues a negative trend.

Equities gained globally, as U.S.-China trade negotiations lowered chances of economic slowing. Bonds were mixed, with yields higher but credit spreads tighter. Commodities were also mixed, with crude oil and industrial metals higher.

U.S. stocks earned strong returns last week, beginning with the S&P 500 rising over 3% on Monday with news from the prior weekend of substantial progress with China on a de-escalation of trade tensions. This included a suspension of earlier tariff rates for 90 days for a continuation of talks, with U.S. tariff rates on China falling from 145% down to 30% (and China-on-U.S. tariffs reduced from 125% to 10%). Cooler inflation also helped sentiment a bit, although many see those prior-month figures as being on borrowed time if/when tariff impacts creep through. Every sector ended positively last week, led by substantial gains of nearly 8% in both technology (led by Nvidia) and consumer discretionary (led by Tesla), while normally-defensive health care gained only a few tenths of a percent (completely due to weakness in UnitedHealth). Real estate also gained about a percent, despite higher yields.

Economic Update 10-28-2024

• Economic data for the week included a decline in overall durable goods, mixed results in housing sales, as well as higher continuing jobless claims, due to a variety of weather and labor issues.  
• Equities declined globally, with higher interest rates and less certainty about central bank rate easing looking forward. Bonds fell back along with rising yields at the longer end of the curve. Commodities gained, largely due to energy, despite a stronger dollar.

U.S. stocks lost ground for the first time in six weeks, as higher interest rates associated with an assumed more drawn-out Fed rate cut cycle and perhaps higher future deficits post-election weighed on sentiment. By sector, consumer discretionary experienced a percent gain (led by a 20%+ return for Tesla, upon better than expected earnings and vehicle sales projections) and a small gain for technology, while negativity was most pronounced in materials, industrials, and health care. Large cap fared better than small cap. Real estate fell about -2% upon the rise in yields.

At the September meeting, the U.S. Federal Reserve Open Market Committee decided to reduce the Fed funds rate by -0.50% to a new range of 4.75-5.00%. There was one voter dissent, where a member opted for only a quarter-percent cut.

The formal statement was updated to reflect the new easing bias, noting that inflation has simply “made further progress...but remains somewhat elevated.” Also noted was that the committee’s labor and inflation goals “are roughly in balance.” Later in the statement, labor was again mentioned in a reminder of the Fed’s dual mandate in “supporting maximum employment” in addition to its inflation objective. The new quarterly Summary of Economic Projections (SEP) put the Fed funds rate expectation at 4.4% for year-end 2024 (down from 5.1% in June), 3.4% for 2025, 2.9% for 2026 and 2027, while the anticipated long-term rate ticked up a tenth to 2.9%.

There hasn’t been this much mystery shrouding a policy change in some time, and surprise announcements have not been common in recent years. Before the meeting, CME Fed funds futures markets evolved toward the chances of a -0.50% cut at as high as 60%, and a -0.25% move at around 40%, after wavering between the two for much of the past month (wisdom of futures markets is correct again). Chances remain high for cuts in November and December, with odds pointing to a year-end rate of around 4.25%. The furthest-out estimate in Dec. 2025 shows the highest probabilities for Fed funds at around 3.00%.

Economic Update 6-03-2024

• For the short holiday week, economic data included U.S. GDP growth being downgraded a few tenths, continued improvement in lower PCE inflation, higher home prices, and improved consumer sentiment.
• Equities were mixed globally, with developed markets down a bit on net, while emerging markets fell further. Bonds were little changed domestically, while foreign markets saw mixed results. Commodities fell back across a variety of sectors.

U.S. stocks fell on the shortened week, but ended May with solid gains to offset weakness from the prior month. By sector, energy and utilities led the way with gains upward of 2%, while technology fell back by over -2% (as a positive week for some stocks was offset by weakness in Salesforce, Adobe, and Microsoft). Real estate also gained, with Friday’s ‘less bad’ inflation news providing a boost.