Weekly Market Commentary

April 29, 2024

The Markets

The economy appears to be slowing down.

Last week, many investors were focused on economic data. The Personal Consumption report offers information about Americans’ income and spending over the previous month. It includes one of the Federal Reserve’s preferred inflation gauges, the personal consumption expenditures (PCE) price index. The March report showed:

• Disposable income, which is the amount of money available for Americans to spend and save (after taxes), rose by 1.4 percent, year-over-year.

• The U.S. personal saving rate moved lower, falling to 3.2 percent, year-over-year.

• Consumer spending was higher than expected, up 0.8 percent from February to March, as Americans spent more on both goods and services.

• Headline inflation increased from 2.5 percent year-over-year in February to 2.7 percent year-over-year in March.

• Core inflation, which excludes volatile food and energy prices, did not change from month to month and remained at 2.8 percent.

What does it all mean?

“More spending is good for the U.S. economy, with consumption accounting for more than two-thirds of the country’s economic activity. But falling savings rates suggest consumers might need to extend themselves financially to keep the shopping going. Friday’s data add to other evidence—such as rising credit card balances and falling excess savings—that suggests, while still strong, the consumer-spending binge won’t continue forever,” explained Nicholas Jasinski of Barron’s.

Investors also had an eye on economic growth. The Fed has been raising rates to slow economic growth which, in turn, should help bring inflation lower.

One way to measure economic growth is through gross domestic product (GDP), which is the value of all goods and services produced over a specific period. Last week, data showed that U.S. GDP growth slowed in 2024. After inflation, the U.S. economy grew by 1.6 percent in the first quarter. That’s down from 3.4 percent growth in the fourth quarter of 2023.

Major U.S. stock indices moved higher last week, according to Barron’s. Yields on most maturities of U.S. Treasuries finished the week higher. However, yields moved lower on Friday after investors decided the Fed is likely to lower the federal funds rate at least once in 2024, reported Ye Xie of Bloomberg.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 

Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

COZZIE LIVS. In 2023, Australia’s Macquarie Dictionary’s word of the year was “cozzie livs”, which the dictionary defines as “the average retail prices of food, clothing, and other necessities paid by a person, family, etc., in order to live at their usual standard,” reported Hanan Dervisevic of the Australian Broadcasting Corporation News.

It’s slang for the cost of living.

Like much of the world, Australia is experiencing a cost-of-living crisis. People have been squeezed by higher prices since 2022 when global inflation was 8.7 percent. Inflation is moving lower. It fell to 6.8 percent in 2023, according to the World Economic Outlook. That’s still well above the inflation rate targets of many central banks.

In the United States, we’ve fared slightly better. Prices rose 6.5 percent in 2022, and 3.4 percent in 2023.

Lower inflation may explain why New York City dropped lower on the list of the world’s most expensive cities. Every year, The Economist Intelligence Unit (EIU) conducts a Worldwide Cost of Living survey. In 2023, the most expensive cities in the world – tied for first – were Singapore, Malaysia, and Zurich, Switzerland. 

In Singapore, “The cost of a certificate needed to own a car (which the government wants to discourage) recently topped $106,000, reported The Economist.

“The three biggest climbers were Santiago de Querétaro and Aguascalientes in Mexico, and Costa Rica’s capital, San José. Beijing was one of four Chinese cities among the ten biggest decliners in the ranking. That reflects the depreciation of the renminbi and the faltering of China’s recovery from the pandemic. Moscow and St. Petersburg fell furthest, plummeting by 105 places to 142nd and by 74 places to 147th, respectively,” reported The Economist.

The global cost of living could remain relatively high if the Israel-Hamas war spreads in the Middle East and energy prices rise. However, Oxford Economics forecast that global food prices will fall in 2024 as bumper harvests produce abundant supplies of many crops, reported Lee Ying Shan of CNBC.

Weekly Focus – Think About It 

“The price of anything is the amount of life you exchange for it.”

—Henry David Thoreau, naturalist