• Economists are becoming less optimistic about US consumer spending in 2024.

 

 

  • The 2024 CPI estimates are also off the peak.

 

 

  • Economists see 50 bps of rate cuts this year.
  • The market is more optimistic, pricing in a chance of three rate reductions.
  • Supply-driven inflation continues to trend down.

 

 

  • Economists expect housing inflation to ease further in the second half of the year.

 

 

  • Existing home sales fell significantly below last year’s levels in June, surprising to the downside, and are now down 45% compared to the average of the previous eight years.
  • – Inventories of existing homes for sale continue to rise, while the median price has reached a record high.
  • Redfin’s index of home price appreciation showed slower price gains last month.

 

 

  • Housing market valuations look stretched.

 

 

  • An increasing share of homeowners are cutting prices to sell their properties
  • The Philly Fed’s regional service sector index has slipped back into contraction territory this month as sales weaken, leading businesses to reduce staffing.
  • The Atlanta Fed’s GDPNow model: 2.7%
  • Bill Dudley, the former president of the Federal Reserve Bank of New York, suggested that the Fed should start cutting rates soon in light of increasing recession risks.

 

Source: MarketWatch   Read full article

 

  • The market has started to price in the possibility of a 50 bps rate cut in September.
  • The yield curve continues to steepen as the market bets on Fed rate cuts. The 10-year/2-year spread is now only -13 bps.

 

 

  • While the manufacturing sector slipped back into contraction territory, …

 

 

  • … the services PMI shows robust expansion.

 

 

  • New home inventories hit the highest level since early 2008.

 

 

  • The GDP expanded by 2.8% last quarter, topping expectations

 

Market Data

 

  • Key US indices are at the lower end of their uptrend channel, …

 

 

  • The S&P 500 had a strong first-half return, which typically leads to above-average returns during the second-half of the year. (2 charts)

 

Source: MarketDesk Research

 

 

  • US equities are entering a seasonally weak period.

 

 

  • Equity futures positioning has been extremely bullish, …

 

Source: Goldman Sachs; @WallStJesus  

 

  • … which explains the recent market weakness.

 

 

  • Insiders have been selling

 

 

Great Quotes

 

“I changed my mind. The Fed needs to cut rates now.”

– Bill Dudley, former New York Fed President, Source: Bloomberg

 

Picture of the Week

 

Pont Neuf, over the Seine, Paris France

 

 

 

All content is the opinion of Brian Decker