Consumer confidence is increasing, job openings are rising and unemployment claims are declining. That's all good news, right? Well, not entirely. In its battle against soaring prices, the Federal Reserve has been raising interest rates for months now, which theoretically will cool the economy and reduce demand. There are some signs it's working — inflation decelerated in July from a four-decade high and the housing market is starting to soften. That fueled a stock rally in July and early August as market watchers speculated the Fed might not need to be as aggressive as feared. But Fed Chair Jerome Powell threw cold water on those hopes last week when he said the central bank won't stop increasing interest rates anytime soon, triggering a selloff that erased $78 billion from the richest Americans' fortunes in just one day. That wasn't an accident: Minneapolis Fed President Neel Kashkari said in an interview with Bloomberg's Odd Lots podcast Monday that he was "happy" to see how Powell's speech was received. As of Wednesday's close, stocks had dropped 8% from their mid-August high. Now, any data showing the US economy is still strong may be taken negatively by the stock market since it could lead to more aggressive rate hikes — a "good news is bad news" mindset, said Brian Overby, senior markets strategist at Ally Invest. "Worse-than-expected data might mean the Fed could ease off the tightening gas pedal," he said. That counterintuitive take underscores the current economic environment, which is puzzling even the most experienced finance professionals. On one hand, the labor market is still hot, with available positions near a record high. But US companies increased headcount at a relatively sluggish pace in August, and workers say they're losing the upper hand as layoffs mount. Meanwhile, it's clear the hot pandemic housing market is beginning to cool — new home sales recently tumbled to the slowest pace since 2016 and home price growth decelerated in June. But economists at Goldman Sachs Group Inc. say the housing downturn still has further to go. Next up, all eyes will be on the jobs report for August, scheduled to come out Friday. It's projected to show 300,000 jobs added — still a healthy pace but a moderation from July's 528,000 surprise — while the unemployment rate is likely to hold steady at a five-decade low of 3.5%. Any positive surprises could trigger another selloff, according to Fiona Cincotta, senior financial market analyst at City Index. "If we do see a strong jobs market still, it means we'll be in the rate-hiking cycle for longer," she said. — Claire Ballentine Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net. - Jerome Powell's speech in Jackson Hole wiped $78 billion from the fortunes of America's richest people.
- About 60,000 sneakers are going on sale after a multimillion-dollar Ponzi scheme.
- Elon Musk's massive fortune increasingly depends on the performance of SpaceX.
- The bottom 50% of Americans are in the strongest financial position in a generation.
- The US Open is going to cost attendees a lot more this year.
- Home price growth slowed in June as the housing market began to cool.
- Singapore is changing its visa rules to attract more foreign workers.
- Americans seeking vacation homes are particularly interested in Mexico.
In Bloomberg Opinion this week, Alexis Leondis explains how Biden's student loan plan neglects older Americans with debt: As it currently stands, Biden's plan would reportedly forgive $10,000 for borrowers who earned less than $125,000 a year for most types of federal student loans. That's a start, but most older Americans have balances well beyond that. Here are two ways Biden could provide a more direct lifeline to those senior borrowers: Automatically cancel all student debt for those who have been in income-based repayment for more than 20 years, and end the practice of dipping into Social Security benefits for those who default. Read her full article here. I was planning to retire soon. Should I wait? The current environment for those hoping to retire this year has many reevaluating their plans. There has been no safe place to hide in the market, and it has many wondering if they should get out of the market. I advise against this because we can't predict what the market is going to do, and how do you know when to get back in? It's reasonable to believe the market will come back and be worth more in the long term. It may mean making some short-term sacrifices to your retirement plan like working longer, or adjusting your expectations about retirement. If you're planning to retire this year, and you haven't done so already, meet with a financial planner to make sure you are in a position to confidently retire. If your employer offers a financial wellness program where you have access to an objective, third-party that acts in a fiduciary capacity, maybe you start there. The bottom line is to have a plan for retirement, don't just wing it and think you have enough. — Kyle Hill, owner of Hill-Top Financial Planning in Kansas City. Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net - Lululemon Athletica reports earning today.
- Semiconductor producer Broadcom releases earnings today.
- The US employment report for August comes out tomorrow.
|
No comments:
Post a Comment