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September Economic Update

Market Summary

The stock market pulled back in August after several consecutive months of positive returns. In the final week of trading, some losses were regained but for the month, all major market averages ended slightly lower. The S&P 500 pulled back -1.77%, the Nasdaq Composite slipping -1.62%, Dow Jones -2.36%, and the Russell 2000 small cap index retreated -5.17%. (1)

Inflation Ticks Higher

After 12 months of declines, the Consumer Price Index (CPI) rose 3.2% last month sparking some concerns that inflation may be creeping back higher after energy prices climbed significantly in June and July. Core PCE, which excludes food and energy prices and measures real estate and services sectors, also gained traction to the upside increasing 4.2% on a year-over-year basis. Both reports contributed to the gyrations seen in the markets in August and pushed Treasury interest rates higher. (2,3)


The Federal Reserve Stays the Course

Federal Reserve officials met at the 46th annual Jackson Hole Symposium where central bankers from across the globe meet to discuss monetary policy decisions. During the keynote speech given by Fed Chair Jerome Powell, he reiterated the current policy commitment to raise rates further to tame inflationary pressures. Specifically, Powell commented on the resilience in the job market with unemployment remaining near historical lows. “We are attentive to signs that the economy may not be cooling as expected,” said Powell while adding the Federal Reserve would be, “prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” (4)


Looking Forward…

After the pullbacks last month, we will be watching to see whether the markets will once again shrug off the Federal Reserve’s recent comments and re-test the recent highs from July or begin to price-in interest rates and inflation remaining higher for longer than what is currently being priced into stock valuations. The energy sector will be in the crosshairs during September as oil prices have sustained double-digit percent gains since June which are placing renewed pressures on inflation. Market analysts will be looking for the seven largest tech stocks for continued strength to sustain any further market rallies.


Overseas, China, the world’s second largest, has been struggling to gain traction after reopening their economy after the prolonged COVID lockdowns. While the Chinese government has been attempting to stimulate the economic activity, their efforts have largely fallen short of any sustainable traction as deflationary forces are beginning to spur concerns over global growth for the rest of the world’s developed markets.


TD Ameritrade & Charles Schwab Merger

Over Labor Day weekend, TD Ameritrade began the integration of customer accounts into the Charles Schwab platform. For clients receiving electronic statements and trade confirmations, the merger should be seamless with your username and password login information remaining the same for the Schwab platform as was for your TD Ameritrade logins. For clients receiving statements and trade confirmations via US mail, you may expect to see these documents being sent from Charles Schwab moving forward. If you have any questions or need assistance with this change, please do not hesitate to reach out to Scott Schneider at 952-857-2416 or via email at Scott@BarringtonCap.com.


 

Monthly Financial Tip:

Your emergency savings funds should be large enough to cover at least six months of expenses in cash.

 

Citations:

1. WSJ.com, August 31, 2023

2. Investing.com, August 10, 2023

3. Investing.com, August 31, 2023

4. FederalReserve.gov, August 25, 2023


Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.



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