Mix Well Before Serving

GeneralMarket Update
Mix Well Before Serving

, Mix Well Before ServingLast week brought mixed signals on the inflation front that cast uncertainty over September’s FOMC policy direction. Moody’s cut some small- and mid-sized bank ratings on concerns of commercial real estate exposure and funding costs. The S&P 500 was down -0.73%, the Dow Jones lost -0.11%, and the NASDAQ retreated by -1.59%. Bonds saw a rally on FOMC policy drivers with the Agg up 0.50%. Alternatives continued to be mixed, with Bitcoin futures up 0.29%, gold down -1.01%, silver down -3.70%, and oil up 1.56%.

Economic data continued to stir the markets and bring concerns over the question of a 0.25% rate hike in September. Monday started the week with a hot consumer credit (SA) print coming in at $17.8 Billion in credit extended vs $13.3 Billion estimated. The MBA 30-Year Mortgage rate came in at 7.1%, a bump up from the previous 6.9% as homebuyers continue to struggle with housing affordability. Thursday brought the star of the show with CPI printing. Core CPI came in at the consensus of 0.20%, while headline CPI also came in at consensus of 0.20%. Friday Ended the week with PPI data. Headline PPI came in just over consensus at 0.3%, as did Core PPI. As the balancing act between inflation and employment continues, markets continue to see stronger possibilities of a soft-landing outcome. With policy pulling inflation down from its post pandemic highs, but the threat of rebound inflation continuing, the question for markets is the direction of FOMC policy into the fall and winter.

This week, retail sales, housing starts, and unemployment are expected to be the standout datapoints on a slow data week. Tuesday brings retail sales, which are expected to tick upward with retail sales expected to come in at 0.4% month over month, compared to 0.2% at the previous report. We see this likely supporting the continued consumer spending narrative, but feel it is worth closely monitoring, as student loan payments resume and budgets are ratcheted tighter. In housing, building permits are expected to tick upward 1,450,000, while housing starts ticked up to 1,440,000. Although a positive bump, housing starts remain off their pandemic peak. Lastly, unemployment data has initial claims expected to stay flat at 248,000 while continuing claims are expected to tick slightly upward to 1,700,000 from 1,684,000.

In domestic irony, Zoom, best known for its video conferencing service, announced a need to shift back to the office for employees. Zoom will begin a hybrid approach, whereby employees will spend at least two days in an office. As a company pivotal to the shift to the remote work during the pandemic joins the ranks of other tech companies moving back to an in-office presence, it shows the shifting preferences in the post pandemic era.

In geopolitical events, the military coup in Niger continues to escalate, with the West African regional bloc ordering troop deployments to restore the democratically elected government. The spread of general instability continues on our radar, as the war in Ukraine impacts global power balances. In Ukraine, President Volodymyr Zelensky announced all officials for military recruitment offices had been dismissed as part of an anti-corruption efforts following 112 criminal proceedings against officials. Zelensky announced the vacancies would be filled by experienced soldiers who have suffered injuries that do not allow them to serve at the front. Hawaii suffered devastating wildfires, leaving at least 96 dead and towns, like Lahaina, decimated. Our prayers are with those impacted by the tragedy.

As we continue towards the end of summer, we generally see calmer waters for markets. This year, however, with policy indicators and economic numbers under a microscope, we know that signs of FOMC direction are going to bring mixed data and crosswinds that must be understood to properly charter our course. Of course, on the home front, many families have children headed back to school in the coming days and weeks. This time often brings mixed feelings and is filled with trepidation. We pray that when these students and families are unsure or worried about this “new year,” they listen for His voice: “Your ears shall hear a word behind you, saying, ‘This is the way, walk in it,’ whenever you turn to the right hand or whenever you turn to the left” Isaiah 30:21.

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