In The Know – August 9, 2024

At Financial Issues, we help you stay informed about the financial issues of the day. We keep you abreast of what’s happening in the economy and the markets, and help you understand how that impacts your personal finances. Here are a few of my takeaways from the economic and market news for the week ending August 9, 2024.

The markets have had a pretty wild ride over the last several weeks. Over the last three to four weeks, the S&P 500 has dropped almost 9% at one point.

We experienced a bumpy ride this past week as well, with the market dropping more than 3% but then recovering to almost where we started.

So, in the past week, the S&P 500 is down less than 1%, sitting at around 0.66%. We’ll see what happens today, as the markets are poised for a negative opening. Market commentators are now saying that the market’s temper tantrum over last week’s jobs report, which indicated a potential recession, was overblown, and the markets have since recovered.

Year to date, the S&P 500 is up 12% from where we stand today. However, I believe the economy is slowing, and we are in for more volatility. If you are a partner, you received an alert this week—please take a look at it and take action as soon as possible.

The biggest economic news this week was expected to be the ISM service index, but there were no real surprises, which was taken as good news and helped the markets recover. The ISM Services PMI in the U.S. rose to 51.4 in July 2024, up from the April 2020 low of 48.8. The July number came in above market expectations of 51, indicating a moderate rebound in U.S. services activity. Not surprisingly, the only areas of real strength in this number were in healthcare (which is heavily influenced by government spending), AI, capital spending, and high-end consumer spending.

The biggest news of the week was in jobless claims. We monitor the jobless numbers every week. Yesterday morning, we received the weekly read on jobless claims and saw a spike in U.S. futures after the initial jobless figure came in lower than expected by 7,000. The number for the week was 233,000, compared to the 250,000 reported last week.

However, my conclusion is that fewer jobless claims for this one week are not as good news as the market is perceiving it to be. The four-week moving average for claims, which rose to 241,000 from 238,000, the highest since August.

So, how does the four-week moving average increase when the most recent number was lower than last week? Because the number that dropped out of the four-week moving average was 223,000, which was removed from the calculation. We had a meaningful drop in continuing claims. Continuing claims decreased significantly in the last half of 2022 as COVID unemployment benefits ran out, starting in September 2021.

We saw a drop in claims post-COVID as unemployment benefits expired, the economy reopened, and people returned to work. Claims then rose slightly, dropped, and are now back on the rise.

Looking ahead to next week, we’ve got inflation data, with PPI and CPI reports due on Tuesday and Wednesday. These numbers have the potential to move the markets significantly if they don’t align with the Fed’s narrative that inflation is moderating. Any surprises in the data could lead to more market volatility.

So again, if you’re a partner, make sure to review the alert we sent out and act accordingly. 

Retail sales data is coming next Thursday. Speaking of inflation, yesterday marked the two-year anniversary of the passage of the CHIPS and Science Act and the Inflation Reduction Act. The White House took the opportunity to celebrate, claiming that Biden’s economic agenda, passed through these two acts, has sparked $900 billion in private-sector clean energy and manufacturing investments. They also claimed that the Inflation Reduction Act lowered health insurance costs for Americans by an average of $800 per year.

However, Republican lawmakers pointed out that grants included in the CHIPS Act have struggled to meet timelines and find workers for the projects being funded. The GOP also argues that the Inflation Reduction Act is primarily a vehicle for pushing Biden’s climate agenda while offering little relief to Americans struggling with high prices and inflation.

We predicted from the start that the Inflation Reduction Act would not achieve its stated goals. The relentless spending of money we don’t have by these two acts is likely to exacerbate inflation in the long run.

While the data may show that inflation has decreased, do Americans really feel that? With numerous social media posts showing grocery prices increasing by more than 100% over the last three years, I don’t think most Americans would agree with the reported data. Critics of presidential nominee Kamala Harris, who cast the deciding vote on the Inflation Reduction Act and the CHIPS Act, have pointed out that she has yet to even mention the word “inflation” in her campaign. I’ve seen several humorous memes about her explaining inflation, and I can only say, Lord help our economy if she is elected president.

Now that you’re in the know about recent and upcoming financial issues, we hope you’ll learn more about how we can help you integrate these issues into your own stewardship. Discover how you can do the one thing you can really control—honor God in the way you invest.

We help you defund darkness with our biblically responsible investment portfolio, and we encourage you to be joyful and generous givers to fund the light. Learn more by visiting Financialissues.org.