Markets “In a Nutshell” for November 13, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 0.70%, the S&P 500 was up 5.90%, and the NASDAQ rose 2.40%. Foreign stocks (MSCI EAFE) were down, falling 0.90%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.61%. (Data source: Wall Street Journal)
Condition of the Consumer
As we head into the end of the year, the biggest time of the year for consumer spending is coming up with the holiday season. The question is if the consumer can continue to be strong despite the headwinds it is facing. With inflation putting strain on the consumer, the excess savings from COVID-19 have now been depleted. The personal savings rate is also lower than pre-pandemic levels and if people begin to start to save more, spending will come down. Credit card debt is now at an all-time high of over $1 trillion and delinquencies are on the rise. Delinquency rates are not at recession levels yet, but it is something to monitor as we move forward. Banks also have tightened lending standards which naturally puts pressure on consumers.
Federal Reserve Outlook
One positive about the possibility of the consumer slowing down is it may give the Fed a reason to stop rate hikes and begin rate cuts shortly. If consumption cools down, prices could also cool off which is what the Fed is looking for. Investors would hope for a slowdown that does not lead to a recession but enough for the Fed to cut rates next year with inflation coming down to their target of 2%. From a stock market point of view, the market typically is forward-looking and has been looking for a cool down in the economy for quite some time. The market could rally over the near year if we see inflation continue to moderate which would lead to the Fed pausing and then cutting rates and lead to economic growth. This would be the ideal situation for the market as a whole.
What was the third-quarter GDP? (Scroll Down for Answer)
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4. 4.9%, this is the strongest quarter of GDP growth since 2021 and well above the trend growth of 1.5%-2.0%. This has been driven by personal consumption.