Weekly Market Watch - August 30, 2024

Weekly Market Watch - August 30, 2024

Despite a dramatic dip earlier this month, the stock market will ultimately show a strong finish for August thanks in large part to the Fed's anticipated September interest rate cuts.

Even with stubborn inflation and ongoing political uncertainty, the S&P 500 and NASDAQ have gained double digits this year, with every sector posting positive returns (especially communication services and financials which are leading the pack).

However, economists are watching closely as a potential stock market correction looms.

Edward Jones / FactSet

  • Upward Momentum: GDP for Q2 was revised up to 3% — a notable jump from the previous 2.8% estimate and a significant leap from the 1.4% growth in Q1. Consumer spending rose 2.9%, and business investment surged 7.5%, led by a 10.8% increase in corporate investment.
  • The Fed’s Next Move: With inflation down to 2.9% — close to the Fed’s 2% target — the central bank is poised to cut interest rates in mid-September, aiming for a "soft landing" to sustain growth without sparking a recession.

Edward Jones / Bloomberg

The cost of the “American Dream” has jumped a staggering 36% since 2014, now requiring an additional $47,000 annually per family of four.

  • Housing and Healthcare Costs: Housing costs alone have contributed $25,104 to the increased expense, with record-high home prices and mortgage rates 2.5% higher than a decade ago. Healthcare costs have surged by 32%, adding $3,123 more to the annual household budget.
  • Other Essentials: Most dramatically, food prices have climbed nearly 36%, while clothing costs have only seen a modest increase of less than 3%.


USA Today

Mortgage rates dipped this week , with the 30-year fixed rate falling to 6.48%, the lowest since April 2023. Forecasters expect this downward trend to continue as the Federal Reserve prepares for those rate cuts in September.

  • Rate and Points: This week’s 30-year fixed mortgages had an average of 0.29 discount and origination points (discount points lower the mortgage rate, while origination points cover lender fees for processing the loan).
  • Housing Affordability: Despite falling rates, high home prices are keeping buyers at bay. The median home price in July 2024 was $422,600, with a typical monthly payment at 26% of the median family income.

Bankrate

Early signs of softness in the job market are causing some concerns, but not cause for panic just yet.

  • Jobs Report Impact: July’s jobs report showed a slowdown in hiring and a rise in the unemployment rate to its highest level since October 2021, sparking some recession worries.
  • Labor Market Outlook: While the job market is softening and the economy may be shifting into a lower gear, analysts confirm a recession isn’t imminent.

Edward Jones / FactSet

Cox Automotive forecasts stable U.S. new-vehicle sales through the rest of August, with the seasonally adjusted annual rate expected at 15.4M (slightly up from last August but down from July).

  • Sales Volume: August sales are projected to increase over 8% from last year and 12% from last month, possibly the highest this year, thanks to 28 selling days and five weekends.
  • Inventory and Incentives: With 2025 models hitting lots, automakers are offering attractive deals which is contributing to boosted sales.

Cox Automotive

Wholesale used-vehicle prices rose 0.5% in the first half of August, continuing an upward trend from July. However, this is still down 4.5% YOY, with seasonal adjustments softening the month’s results.

  • Price Trends: The unadjusted price change for early August was up 1.6% from July but down 5.2% year over year. The increase aligns with longer-term trends, with the three-year-old segment leading the gains.
  • Market Activity: MMR prices in the Three-Year-Old Index increased by 0.4%, defying the usual seasonal decline. The sales conversion rate hit 63.4%, up from July and above pre-pandemic levels, signaling stronger buying demand.

Cox Automotive / Manheim

All major market segments saw year-over-year price declines , but the rate of decline is slowing. Some segments even showed month-over-month increases, indicating a potential shift in the recent down-ward trend.

  • Segment Performance: Luxury vehicles saw a 4.1% drop from last year but were up 2.3% from July. Midsize cars fell 4.3% year over year but gained 1.2% month over month. SUVs and pickups experienced steeper declines, while compact cars dropped 6.2% year over year and 0.4% from July.
  • EV vs. Non-EV: EV prices were down 7.2% year over year but jumped 4.4% from July. Non-EVs declined 3.6% year over year but rose 1.1% month over month.
  • Consumer Sentiment: Mixed trends in consumer sentiment for August. The University of Michigan’s index rose 2.1% to 67.8, driven by future expectations, though it’s still down 2.3% from last year. Gas prices decreased 1.4% in August, down 11% from last year but up 10% year to date.

Cox Automotive / Manheim

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