Weekly Newsletter 9/13/24

Good afternoon,

Stocks are on track for strong gains this week after last week saw the S&P500 suffer its biggest pullback since the west coast banking crisis during March of 2023.

The narrative today seems to be a rate rally on the back of lingering debate about whether the Fed will cut rates by 0.25% or 0.50% next week. The European Central Bank (ECB) cut rates earlier this week. While slightly hotter inflation data this week seemed to underpin the case for 25 bp, a couple of reports in the financial press have suggested the door for a more aggressive move has not been closed.

The narrative today seems to be a rate rally on the back of lingering debate about whether the Fed will cut rates by 0.25% or 0.50% next week. The European Central Bank (ECB) cut rates earlier this week. While slightly hotter inflation data this week seemed to underpin the case for 25 bp, a couple of reports in the financial press have suggested the door for a more aggressive move has not been closed.

Next week brings retail sales, housing data and the first regional manufacturing prints for September. Retail sales expected to get outsized attention given the Fed's heightened scrutiny on growth risks.

Ally Financial, one of the largest car finance companies in the U.S. (providing car financing and leasing for 4.1 million customers and originating 1.2 million car loans in 2023) announced a negative Q3 update, noting credit challenges have intensified. Some have suggested Ally is an outlier, however, the financial firm said it has been seeing more strain it its consumer car loan business. The company’s stock fell sharply on Tuesday after the consumer lender said delinquencies in its retail car-loan business were up more than expected as people continue to struggle with inflation.

On a related personal finance note, I have empathy for the younger generations and their ability to afford college, pay for a car and, at some point, buy a home. Over the last 5 years, the median US home price has skyrocketed by ~40% to $445,000. At the same time, the median size of a home has declined by ~130 square feet, or 7%. To put this in perspective, a home in the US would cost a median of $160 per square foot in 2019. Now, the median home cost is $238 per square foot, a near 50% increase in 5 years. The average wage growth over the same 5-year period is 28%. Don’t get me started with the skyrocketing insurance costs whether it be car, medical or home. The theme seems to be, costs go up, service and coverage goes down. I have heard from more than a few folks they are contemplating dropping their homeowner’s insurance…a very risky move in my opinion. The key to financial success is to keep your overhead low…easier said than done in some cases.

The link below contains additional financial articles and personal finance topics.
https://www.raymondjames.com/evangelista/resources

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
Albert Einstein

Thank you,

Kyle

KYLE CHRISTIANSON, CFP®
Financial Advisor
Raymond James & Associates, Inc.
1421 Pine Ridge Rd, Ste 300
Naples, FL 34109
Toll Free (800) 843-2025 | Direct (239) 513-6525 | Main (239) 513-6500 | Fax (239) 596-5474
Kyle.Christianson@RaymondJames.com

Any opinions are those of Kyle Christianson and not necessarily those of RJA or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This is not a recommendation to purchase or sell the stocks of the companies mentioned. Leading Economic Indicators are selected economic statistics that have proven valuable as a group in estimating the direction and magnitude of economic change. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Individual investor's results will vary.