Spending and Losing
This past week, the S&P 500 entered “correction territory”, where the index had fallen over 10% since its peak in July this year. As the S&P remains the index that several equate to the performance of the American economy, some wonder why markets have faltered alongside positive economic news. For the third quarter, U.S. GDP grew stronger than expected, rising 4.9% quarterly after forecasts of only 4.3%. Other indications from September’s strong labor data and retail sales data have pointed to a healthy American consumer. Even the most recent corporate earnings have shown stellar growth, with the S&P 500 consumer-discretionary companies reporting an average profit gain of 15%.
With corroborating evidence pointing to a strong economy and consumers, markets have collectively fallen in the past three months as popular figures and “bear” investors proclaim the chances of a future recession. 20-year high interest rates and the fear of a resurgence in inflation have pushed both risk and uncertainty higher, with the most recent market movement focused on the Federal Reserve and its sentiment. Although rates have only severely affected the housing market, the chances that higher rates will affect the consumer and corporate world remain strong, especially if these rates wouldn’t be cut until the late 2024 prediction. Regardless, recent data and earnings have pointed to strength, but too strong of economic activity could be translated to growing inflation.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.