Week In Review
After two consecutive quarters of declining US gross domestic product (GDP), which many consider the benchmark for an economic recession, we saw a better-than-expected rise in economic activity for the third quarter. US GDP rose by an annualized 2.6% between July and September. However, we continue to hear calls similar to what JPMorgan president Daniel Pinto said on Monday about how the worst economic news and data is yet to come.
The Fed's preferred gauge for inflation showed prices increased by 0.5% in September. The PCE report probably doesn't change much as far as the Fed is concerned. They are set to meet next week and expected to raise interest rates yet again by another 0.75%. The rate hike campaign they've been on this year has yet to show up in any meaningful way in terms of inflation, but we are starting to see some strains on the US consumer. Savings rates are down and credit card balances are up as consumers adjust to higher prices.
The S&P 500 rose 3.9% this week as some of the largest companies in the world reported on their third quarter earnings and gave their opinions on the outlook of the economy. The results for companies ran the spectrum this week. We saw companies like Visa and Caterpillar beat their expectations, and give rosy guidance. Visa said it's outlook assumed their would be no recession in the US. Caterpillar said it expects the fourth quarter to be it's best yet this year in terms of sales. On the other end of the spectrum, we saw mega cap tech companies continue to get hit hard. Amazon and Meta both fell by more than 20% immediately following their earnings reports. We continue to see strength and outperformance in the Dow stocks over the Nasdaq, a reversal from what we saw from the March 2020 lows. The Dow is down "just" 11% this year, while the Nasdaq is still off 30% from it's previous high.
What We're Reading
- I Hated Fishing. Then Fishing Changed My Life - Jason Gay
- Elon Musk Takes Twitter Helm as Social Media Sputters - WSJ
- Budgeting Time - Jonathan Clements