MacGray Matter

Market Euphoria and Beach Memories

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July 30, 2023

ANOTHER RATE HIKE: The U.S. Federal Reserve Bank announced Wednesday that it raised its key interest rate by 0.25% once again, a move that surprised no one. The current interest rate has not been this high in 22 years. The Fed made the following comments that explain its thinking:

Recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.

The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.

EUROPE RAISING RATES TOO: The European Central Bank raised its key interest rate by 0.25% to 3.75%. Inflation in the Eurozone recently decreased from 6.1% to 5.5%.

THE U.S. ECONOMY GREW AT A HEALTHY RATE IN THE SECOND QUARTER: Last week, I wrote that the average prediction for second quarter U.S. economic growth was 1.8%. The Commerce Department announced on Thursday that the U.S. gross domestic product grew at a rate of 2.4%, a welcome surprise. Consumer spending slowed a bit from the first quarter (but was still more than expected), but business investment increased.

STOCKS RISE MORE: Despite the Fed raising rates once again, investors generally liked the economic news they saw and continued to fuel 2023’s broad market rally. Inflation data and GDP growth sparked buying at higher prices. In addition, we are about half way through earnings reports and 80% of companies are reporting earnings higher than consensus expectations. Meta (Facebook) and Alphabet (Google) both rose over 10% after reporting accelerated sales growth.

LONGER-TERM PERFORMANCE: Below are the annualized three-year and five-year numbers for these same indices.

ANOTHER INFLATION GAUGE SHOWS CONTINUED EASING: The Fed closely watches the Personal Consumption Expenditures Index (PCE). The Bureau of Economic Analysis announced that June’s PCE rose by 0.2%, and the 12-month inflation rate was 3.0%. If you exclude food and energy costs, which the Fed likes to do (because those two items are much more volatile), then the 12-month PCE Index decreased from 4.6% to 4.1%.

NEW UNEMPLOYMENT CLAIMS DECREASE: The labor market in the U.S. remains very strong. Last week, 221,000 new claims for unemployment were filed, a decrease of 7,000 from the week before.

WRAPPING UP A BEACH VACATION: Our family returned to a favorite ocean front beach location for a family vacation. The family is growing. It was a wonderful time.

Have a great week!

Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®
President
Stonecrop Wealth Advisors, LLC
Direct | Cell | Fax
(610) 628 4545
dmacgray@stonecropadvisors.com

“My goal as a creative person is to express truth and beauty in whatever I do.” Tony Bennett

“And he said to them, ‘Come away by yourselves to a desolate place and rest a while.’” Mark 6:31

SOURCES:
ANOTHER RATE HIKE: https://www.federalreserve.gov/newsevents/pressreleases/monetary20230614a.htm AND https://www.npr.org/2023/07/26/1190093285/fed-federal-reserve-interest-rates-borrowing-inflation
ANOTHER INFLATION GAUGE SHOWS CONTINUED EASING: https://www.bea.gov/news/2023/personal-income-and-outlays-june-2023
THE U.S. ECONOMY GREW AT A HEALTHY RATE IN THE SECOND QUARTER: https://www.wsj.com/articles/us-gdp-report-economic-growth-92482437?mod=article_inline
NEW UNEMPLOYMENT CLAIMS DECREASE: https://www.dol.gov/ui/data.pdf
EUROPE RAISING RATES TOO: https://www.cnbc.com/2023/07/27/ecb-rate-decision-july-2023-raises-rates-by-25-basis-points.html

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets.
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States.
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets.

Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

SDG

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Market Euphoria and Beach Memories

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