The Federal Reserve started hiking interest rates in March of 2022, and since then we have been discussing if those hikes would result in a recession or if the Fed could engineer a soft landing. A recession seemed more likely than a soft landing, but we were all hoping for the best. Now economists are starting to throw out the term “no landing”. What is this unicorn?
First, a recession is commonly thought of as two or more quarters of negative Gross Domestic Product (GDP) growth. It’s more complicated than that as official US recessions are called by the economists at the National Bureau of Economic Research (NBER). They look at many data points including GDP, payrolls, industrial production, and retail sales. And a soft landing is considered to be a gradual slowdown in the economy to get inflation to the Fed’s target without going all the way into a recession.
So, what is a “no landing”? This would occur if the economy does not slow down but continues growing. A recession could be delayed or there would be no recession at all with interest rate hikes bringing inflation back to the Fed’s target of 2%, but additional rates hikes may be needed. Either way it would include rates being higher for longer than originally planned. Is this possible? We will see in the coming quarters, but economists are arguing both that it is possible and that it’s not. (msn.com) Bloomberg Morningstar
Retail Sales Numbers Out This Week – US Consumers Are Still Spending: Retail sales rose 0.7% in July, which was above expectations. It was the fourth consecutive month of higher retail sales. We are watching to see what will happen this fall with the end of the student loan payment pause and other pandemic-era government programs. Will spending continue to exceed expectations or will student loan repayments become a drag on the economy? (msn.com) WSJ
In Other Parts of the World
Russia: The Bank of Russia raised interest rates to 12% in an attempt to stop the slide of the Ruble. They are dealing with the fall in commodity prices and continued sanctions that are in place due to their invasion of Ukraine. WSJ (msn.com)
China: As the second biggest economy, struggles in China can affect the US markets. The commodities and energy sectors are both being affected by the slowdown in the Chinese economy. China’s central bank cut interest rates this week in an attempt to boost growth. There are starting to be signs of disinflation. Higher unemployment is also showing up and China stopped reporting on youth unemployment data. The jobless rate for 16-24-year-olds was over 20% at the last reporting. (msn.com)
Japan: For the first time in a while, Japan is in the news for economic growth! Their economy grew at an annualized rate of 6% in the 2nd quarter. (nytimes.com) (cnbc.com) What I didn’t know was that Japan is the 3rd largest economy. I was surprised by that. Here is a great visual of all the world economies. It makes you realize just how big the US and China are. (visualcapitalist.com)
Financial Planning/Investment Strategy Corner:
With fall approaching many families are sending their children off to college for the first time. Here are a few items to consider during this time:
- Here is a list of documents to complete before your child moves away (for college or something else). We forget that once our kids are eighteen, they are legally adults and often that means we need legal documents so that we can been informed of their financial and medical conditions. Of course, the newly minted adult must agree. WSJ
- Here are some tips on how to prepare for freshman year. (usnews.com)
- Here are some tips for the parents of those freshman. Psychology Today
- And here is a great list of what is included as qualified expenses for 529 plans. 529 Plan Rules (savingforcollege.com)
Quick Hits:
- The Maui wildfires are absolutely awful. The pictures and stories make all of us want to do something. Our advice is to be careful. If you want to give, give to known organizations like the American Red Cross or the United Way. As much as we hate to admit it there are people out there who will take advantage of this disaster, so we need to be careful in how we help. How to help those affected by the Maui fires (nbcnews.com)
- I am guilty of buying more books than I can read. I think I have three half-read books currently on my nightstand! How to Actually Read the Books You Buy (lifehacker.com)
- I don’t have plans to visit Europe in 2024 (yet 😊) but I know clients do. Here is what you need to know about the new travel visa rules for Europe. American Travelers Will Need a 'Visa' for the EU in 2024 (cntraveler.com)
- So, I am late to this tofu thing, but we had an RSWA BBQ and we made deep fried tofu – it was great! Of course, you could deep fry almost anything, and it would be great, but it made me want to try other recipes. Here are some. 18 of Our Best Tofu Recipes (That Are Actually Delicious!) - Taste of Home
“Global Wealth Rises, Inequality Falls”: This is not something you hear about often. In fact, you usually hear the exact opposite. Global inequality is still in unacceptable territory with the top 44.5% of global wealth being held by 1% of the population. But global median wealth, which the study uses as a proxy for how a typical person is doing, went up by 3% in 2022. New data: Global wealth rises, inequality falls (axios.com) Global Wealth Report 2023 | UBS Global
Quote: I was hoping for a quote to inspire the new college freshman, but I think this one is good for anyone.
“To accomplish great things, we must not only act but also dream, not only plan but also believe.” -Anatole France
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