Insight

September Market Update

At TM3 Wealth, it is important that you are well-informed about what is happening in the markets. Here are a […]

At TM3 Wealth, it is important that you are well-informed about what is happening in the markets. Here are a few of the key topics of conversation that deserve the most attention this month. If you have any questions or would like to continue the conversation, please reach out.

US inflation unexpectedly picked up in August, largely due to rising housing and travel-related costs. Housing was the biggest driver, with rent disinflation remaining stubbornly slow. Housing costs increased by 0.5%1, the most since the start of the year, undermining what could have been a more predictable inflation report. The core Consumer Price Index (CPI), which excludes volatile food and energy prices, climbed 0.3% from July – the highest monthly gain in four months – and increased 3.2% year-over-year1. Meanwhile, the overall CPI increased by 0.2% month-over-month and 2.5% year-over-year, its fifth consecutive month of easing thanks to falling gas prices1. Despite rising shipping costs, core goods prices continued to decline1, reflecting firms’ growing struggle to pass on higher input prices to consumers.

US hiring in August fell short of forecasts, with just 142,000 new jobs, while downward revisions to the previous two months left the three-month average at its lowest since mid-20202. This weaker-than-expected growth will likely fuel ongoing debate about how much the Federal Reserve should cut interest rates throughout the rest of the year. Despite the disappointing job gains, the unemployment rate edged down to 4.2% from 4.3%, marking the first decline in five months2. Overall, August’s jobs report painted a mixed picture – while the slight drop in unemployment suggests improvement, downward revisions to July data and weak payrolls indicate that job creation was likely flat in July and barely positive in August2.

On the consumer front, sentiment climbed to a four-month high in September, driven by the lowest short-term inflation expectations since late 2020 and hopes for lower borrowing costs3. The University of Michigan’s sentiment index rose to 69 from August’s 67.9, preliminary data showed3. Consumers expect prices to rise at a 2.7% annual rate over the next year, down from 2.8% in August, marking the fourth straight month of falling short-term inflation expectations, which has been a major driver of sentiment recently3. However, despite the improvement, a record number of households remain uncertain about the economic outlook3 with most expecting inflation to further erode their incomes, and confidence in a comfortable retirement is at its lowest in a decade3.

The bottom line: Although August’s CPI exceeded expectations, it likely will not stop the Federal Reserve from beginning its rate-cut cycle at the upcoming September meeting. Policymakers remain focused on softness in the labor market, which is expected to play a key role in shaping decisions in the months ahead. With uncertainty still surrounding the size of the rate cut – whether 25 or 50 basis points – market volatility is expected to persist, as nearly half of traders are betting on a larger cut at the time of writing. Regardless of the outcome, the Fed faces a challenging decision as it balances inflation control with the potential impact on employment and economic growth.

Sources:

  1. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
  2. Bureau of Labor Statistics, https://www.bls.gov/news.release/empsit.nr0.htm
  3. University of Michigan, http://www.sca.isr.umich.edu/

Disclosures:

The material presented includes information and opinions provided by a party not related to Thrivent Advisor Network. It has been obtained from sources deemed reliable; but no independent verification has been made, nor is its accuracy or completeness guaranteed. The opinions expressed may not necessarily represent those of Thrivent Advisor Network or its affiliates. They are provided solely for information purposes and are not to be construed as solicitations or offers to buy or sell any products, securities, or services. They also do not include all fees or expenses that may be incurred by investing in specific products. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. You cannot invest directly in an index. The opinions expressed are subject to change as subsequent conditions vary. Thrivent Advisor Network and its affiliates accept no liability for loss or damage of any kind arising from the use of this information. 

 Investment advisory services offered through Thrivent Advisor Network, LLC., a registered investment adviser and a subsidiary of Thrivent.  Clients will separately engage a broker-dealer or custodian to safeguard their investment advisory assets.  Review the Thrivent Advisor Network ADV Disclosure Brochure and Wrap-Fee Program Brochure for a full description of services, fees, and expenses. Thrivent Advisor Network LLC advisors may also be registered representatives of a broker-dealer to offer securities products.

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser.  TM3 Wealth and Thrivent Advisor Network, LLC are not affiliated companies. Information in this message is for the intended recipient[s] only. Please visit our website www.tm3wealth.com for important disclosures.

This communication may include forward looking statements. Specific forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and include, without limitation, words such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “seeks,” “could’” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to differ materially.

Index Benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The ISM Services (formerly Non-Manufacturing) Index released by the Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector.

The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting. The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.

The Bureau of Labor Statistics (BLS) is an agency of the United States Department of Labor. It is the principal fact-finding agency in the broad field of labor economics and statistics and serves as part of the U.S. Federal Statistical System. BLS collects, calculates, analyzes, and publishes data essential to the public, employers, researchers, and government organizations.

Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.

The term Institute for Supply Management (ISM) refers to a nonprofit supply management association. Established in 1915, it is the largest organization of its kind. It provides certification, development, education, and research for individuals and corporations in the supply management and purchasing professions.

Related Insights