Investors and economists are optimistic that consumer spending, the main driver of the US economy, won’t decline significantly, which should prevent stocks from seeing a significant sell-off this year. Investors shouldn’t, however, anticipate exceptional gains any time soon.
“We’re expecting the labour market to soften somewhat the rest of the year, and we’ve seen both credit-card balances and delinquencies increasing, so that should flow through to softer consumer spending,” Matthew Palazzolo, senior investment strategist at Bernstein Private Wealth Management, told CNN. But we don’t anticipate a serious recession. Undoubtedly, we anticipate a downturn of the economy.
That would entail, according to Palazzolo, that “markets move sideways for the balance of the year until we get better visibility into what 2024 looks like.”
Although shares have declined in August, the stock market has increased overall this year, largely due to chipmaker Nvidia and the buzz surrounding artificial intelligence boosting tech equities. Due to investors clearing out for holiday, this month is often negative for equities.
The start of student loan installments in October is one economic headwind that could cause Americans to reduce their spending.
How much of an impact student loan repayments will ultimately have on expenditure is still up in the air. In an effort to lessen the shock, the Biden administration has implemented an income-driven repayment scheme. The average monthly payment for the 44 million Americans with student loans, according to Wells Fargo, ranges from $210 to $314.
The fact that the economy is still coping with the central bank’s most vigorous inflation-busting programme in decades is another major concern for both Fed officials and investors. According to research, it might take at least a year for the effects of rate increases to spread to the rest of the economy. In March 2022, the Fed started to raise rates. The latest walk took place last month.
Fed Chair Jerome Powell said on Friday that “there may be significant further drag in the pipeline” that the economy hasn’t yet felt in his eagerly awaited speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming. He cautioned that it’s unclear when those effects could take hold.
For the Fed, it would be encouraging if the economy did start to slow down. It has been seeking to do just that, to slow down the pace of the economy and lower inflation. The American consumer’s addiction to credit cards is another issue on the minds of investors and economists. As their savings accounts have decreased, Americans have been progressively accruing debt this year. According to recent study from the San Francisco Fed, Americans will run out of extra savings by the end of this quarter because to pandemic-related stimulus payouts and refraining from purchasing during lock-downs.
Since the US consumer is a major engine of the economy, she added, “We’re watching the consumer, but we believe those effects are likely to be at the margin.” “A potential warning sign about the strength of the consumer would be if the holiday spending period is less robust.” Nearly 20 years have passed since labour market changes in Germany helped the country shake off its reputation as the “sick man of Europe” and usher in a period of sustained economic growth.
Unfortunately for Berlin, my colleague Anna Cooban writes that the phrase is making a comeback.
The biggest economy in Europe is in a slump as a result of sticky inflation and three consecutive quarters of declining or stagnant GDP.
So much so that the IMF predicts Germany will be the only advanced economy to decrease this year, with a contraction of 0.3%, compared to a 0.9% average growth for the 20 nations that use the euro, which includes Germany. An extended downturn would be disappointing for an economy that, in the decade after the 2008–2009 financial crisis, grew by an average of 2% annually, had a budget surplus for the majority of that time, and saw a surge in exports.
earnings from Big Lots and Best Buy. The S&P CoreLogic Case-Shiller National Home Price Index for June is made available by S&P Global. The US Labour Department releases data on hiring, firing, and job openings for the month of July. The Conference Board makes available its August Consumer Confidence Index.
The second estimate of the second quarter’s gross domestic product is released by the US Commerce Department. Based on contract signings in July, the National Association of Realtors releases data on house sales. The National Bureau of Statistics of China publishes business surveys for August that measure economic activity in the manufacturing industry.
Victoria’s Secret revenue. Data on inflation for August are made public by the statistics office of the European Union. Data on household spending, income, and the Fed’s favoured inflation index are released by the US Commerce Department for July. The number of new applications for unemployment benefits in the week ending August 26 is reported by the US Labour Department.
Data on the labour market, including monthly payroll increases, wage growth, and the unemployment rate, are released by the US Labour Department for August. Business surveys for August are released by S&P Global and the Institute for Supply Management to measure economic activity in the US manufacturing sector.