The Pulse on the Economy and Capital Markets: September 2024

To Summarize: The markets rose on expectations that the Federal Reserve would be more aggressive in cutting interest rates. Consumer spending trends are split as lower-income groups continue to struggle, while middle- and upper-income groups are still spending, just more cautiously. Economic indicators show mixed signals for the services and manufacturing sectors, and China’s weak economic data ripples through other economies. We unpack this and more in the September edition of The Pulse.

In the Markets: The stock and bond markets rallied on expectations that the Federal Reserve (Fed) would change its interest rate policy, which it did by a 50 basis point rate reduction. What was the driving force behind the Fed’s rate cut decision? Inflation data came back lower than expected and economic data a little softer, driving rates lower and optimism higher. 

A Tale of Two Consumers: Despite a growing economy, consumers are painting a mixed picture. Lower-income consumers are stressed as retailers notice changes in buying behavior. Meanwhile, middle- and upper-income consumers are showing resilience, but their buying habits have shifted to more thoughtful spending. 

Global Economic Environment: The services sector, while still expanding, shows signs of deceleration compared to last year. However, the manufacturing sector faces more challenges as the recent ISM report shows manufacturing has dipped below the expansion threshold of 50 and new orders continues to trend down. Weak economic data from China is creating a global ripple, which could exacerbate pressures for the manufacturing sector. 

Top Headlines: We’re reading about how retail sales surpassed Wall Street estimates in August, Microsoft and BlackRock create a $100 billion fund to invest in AI data centers and power, commercial property prices are up more than 3%, and JPMorgan is negotiating to buy Apple Card from Goldman Sachs at a discount.   

Related resources:

• The surprising strength of consumer spending – Retail sales top Wall Street estimates in August
• Microsoft and BlackRock partner to raise $100 billion fund to invest in AI data centers and power
• Green Street – Commercial property prices up more than 3% this year
• JPMorgan negotiating to take over Apple Card from Goldman Sach at a discount