Good Economic Signals, Stocks Jump, and Why Wasps?

August 19, 2024

INFLATION RATE COOLING:  The rate in inflation continued to come down in July. The Consumer Price Index was up 0.2% for the month, and up 2.9% from a year earlier. That brings it back to the rate in March of 2021. The "core" CPI rose 3.2% over the last twelve months, its lowest reading since April 2021. The rate of inflation is cooling. The index for shelter rose 0.4%, and was up 5.0% year over year, and caused virtually all of the increase in July.

MONEY SUPPLY:  If you look at the chart below, it looks kind of similar to the one above. Above is inflation which started going up in early 2021. What happened before that? Money was infused into the economy through a variety of programs to keep the economy moving during and after the shutdowns. Ultimately, we had too much money in the system. Too much money creates the perfect environment for inflation, and you can see that shortly after the spike in money supply, inflation followed. Money supply is decreasing, and inflation is moderating. 

U.S. CONSUMERS STILL SPENDING:  Most economists believed that retail spending would be close to flat in July, but according to the U.S. Census Bureau, American consumers increased their spending by 1.0% in July. But the Census Bureau also revised their numbers for May and June, lowering them by 0.2%. Overall, it was still an encouraging outcome for July.

PRODUCER PRICE INDEX RATE DECREASES:  The Producer Price Index (PPI) is an index of costs for producers, or prices at the wholesale level. This tends to be a leading indicator of where the Consumer Price Index will go. The PPI numbers came in early in the week, and prices for July were up only 0.1%, and the annual number moved from 2.7% to 2.2%. 

BEST WEEK FOR STOCKS ALL YEAR:  Stocks continued to climb, building on the winning streak that started the week prior. Stocks began to move up in earnest on Tuesday when the encouraging Producer Price Index was announced (see above). Encouraging reports on consumer prices and retail sales kept the momentum going. The investing markets seem to be moving decisively every time a bit of economic news, good or bad, is announced. Last week the news was mostly good.

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

SEPTEMBER RATE CUT?:  Right now, if you follow the economic prognosticators, the argument is not over whether the Fed will lower rates at their September meetings, but by how much, a half or a quarter point.  

NEW HOME VALUES PLUNGING IN CHINA:  The cost of a new home in China was 45% lower in July than the average over the past four years. In June, home prices were 37% lower than the four-year average. One of China's largest new home builders, Shimao Group Holdings, saw its share price decrease over 50% in the past few months. The Chinese government has stated that it is not going to do anything "drastic" to provide relief.

WHY DOES IT HAVE TO BE WASPS!:  There was a very famous line in the first Indiana Jones movie where the hero looked down into an archaeological site and saw the floor moving. On closer examination, the movie's hero, famously scared of snakes, said "Why does it have to be snakes?!" I grew up in a house that seemed to always be penetrated by wasps. I grew to hate them, and developed a growing fear of them. In real life, I have faced down a wolf once while cross country skiing. I was once confronted with a mugger who had a knife. In neither case did my heart rate go up as it does when I'm confronted with the flying, buzzing, hateful menaces. All this is a preface to an event we had this past week. We have an exterminating service that comes in every so often to inspect and treat the house. On this visit, the exterminator noticed a wasp nest on the side of the house. He knocked it off, and got rid of them. I thought we dodged a bullet. Unfortunately, he didn't look close enough. That outside wasp's nest was connected, through a hole they had created, to the rest of the nest inside the house in the basement. On going to the basement later in the week, we noticed getting buzzed by a couple of wasps, so we made a fast escape and got the exterminator to come back. After going to our basement, he came right back up, and went back down dressed in a whole new outfit (see below).

The remaining one foot by one foot wasp nest was embedded in the insulation on the side of the unfinished side of our basement with lots of angry wasps. After a while, the exterminator came up and said, "I'm out of insecticide; I need to get more." He went down again, and finally came back up with a bucket full of nest and dead wasps. He said he was "pretty sure" he got them all. PRETTY SURE!!!!!

WHERE'S DOUG?:  I was at a wedding reception in New Jersey last week. This week I am at a wedding and reception in a different part of the country. On the morning of the rehearsal dinner, we visited this place. Does anyone know where I am?

Have a great week!

Our purpose is to honor God by helping our clients 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

"Say I feel all sad and self-indulgent, then get stung by a wasp, my misery feels quite abstract and I long just to be in spiritual pain once more - 'damn you tiny assassin, clad in yellow and black, how I crave my former innocence where melancholy was my only trial'." Russell Brand

"I will send the hornet ahead of you to drive the Hivites, Canaanites and Hittites out of your way."  Exodus 23:28 (NIV)

SOURCES:

INFLATION RATE COOLING: https://www.bls.gov/news.release/cpi.nr0.htm AND https://www.wsj.com/economy/central-banking/inflation-july-cpi-report-interest-rate-00cd3a84?mod=economy_feat1_central-banking_pos2

U.S. CONSUMERS STILL SPENDING: https://www.census.gov/retail/sales.html

NEW HOME VALUES PLUNGING IN CHINA: https://www.zerohedge.com/markets/china-home-prices-just-plunged-most-2015

PRODUCER PRICE INDEX RATE DECREASES: https://seekingalpha.com/article/4714251-producer-price-index-wholesale-inflation-cools-in-july

(c) 2024 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

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

SDG

*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.