Dear valued client,
Markets finished with gains (+2.5%) this week to close a rather sluggish month for equities.
Despite the light week in terms of economic news, there were two noteworthy reports released;
(1) According to the National Association of Realtors, U.S. pending home sales ticked up in July by 0.9%, rising for the second consecutive month against the backdrop of elevated prices and rising mortgage rates. The stronger-than-expected figures exceeded market expectations that assumed home sales would drop after June. It is important to note, however, pending home transactions are down 14% from a year ago.
(2) The U.S. August jobs report showed the labor market added 187,000 new jobs, and the unemployment rate increased to 3.8% (compared to 3.5% a month prior). This is both good and bad news, depending on the perspective you take. It is bad news for those losing employment – especially the individuals who have bills to pay and families to feed. However, it is good news from a broader economic viewpoint as higher unemployment is a sign that inflation will continue its downward trajectory – as described by the Phillips Curve. Lowering inflation equates to reduced chances of future interest rate increases.
The consensus on Wall Street at the moment seems to be one, maybe two more rate hikes before the end of the calendar year. If the data continues to trend positively, interest rate cuts could start as early as mid-late 2024.
I’d like to leave you with a passage from Epictetus, one of my favorite Stoic philosophers. Epictetus was born a slave in the Roman Empire roughly half a century after Christ. Once freed, he established a school of philosophy that included distinguished students such as Marcus Aurelius. This is a short meditation on what genuine freedom entails:
“Most people tend to delude themselves into thinking that freedom comes from doing what feels good or what fosters comfort and ease. The truth is that most people who subordinate reason to their feelings of the moment are actually slaves of their desires and aversions. They are ill-prepared to act effectively and nobly when unexpected challenges occur, as they inevitably will.
Authentic freedom places demands on us. In discovering and comprehending our fundamental relations to one another and zestfully performing our duties, true freedom, which all people long for, is indeed possible.”
Have a terrific weekend,
PW
