September 2, 2024
THE OTHER INFLATION MEASURE: The Federal Reserve likes the Commerce Department's Personal Consumption Expenditure index (PCE). The PCE rose 0.2% in July, up 2.5% from a year ago. The "core" PCE, which strips out food and energy, was up 0.3%, and 2.6% for the year. This may be the affirmation the Fed needed before their September meeting to finally begin lowering interest rates.
AUGUST JOBS REPORT: This coming Friday, we will get the August jobs report. According to Bloomberg Economics, "[P]ayrolls will likely improve from July's disappointing reading - but the 818k downward revision in the [U.S. Bureau of Labor Statistics'] early estimate for the March 2024 benchmark period probably leaves Fed officials less willing to take the initial prints at face value." Unfortunately, the BLS has lost a little credibility, which will make investor reactions to the data announcements even more unpredictable.
AUGUST TURNS INTO A POSITIVE MONTH FOR THE S&P 500: By August 5, the S&P 500 was down over 6% for the month. Stocks bounced back. With a strong finish on Friday, the S&P 500 ended the week positive and the month up over 2%. In the first part of August, the disappointing labor data was announced, but stocks bounced back with more encouraging retail sales and inflation data. Currently, the economy is heading in the wrong direction, but the overall market temperament indicates that investors believe the economy remains in decent shape, and the Fed will spur it on later this month before negative trends get alarming.

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

NVIDIA DISAPPOINTS?: Nvidia stock did not do well last week. It reported its second quarter earnings. It reported a 122% year-over-year revenue increase, marking four consecutive quarters of triple-digit growth. After making $30 billion last quarter, they are projecting $32.5 billion this quarter. Obviously, investor expectations were sky high. Its stock decreased by nearly 8% this week.
MEANWHILE, UP NORTH: The Bank of Canada appears poised to announce a third straight rate cut with inflation within its target all year and a weakening labor market.
CHINA OFFICE SPACE: Data out of large Chinese cities indicate a sick economy. In Shenzen, the prime office space vacancy rate was 27% in June, up from 20% in June 2022. Rents are down 15%. In Shanghai and Guangzhou, the vacancy rate is 21%. Despite this data, new supply keeps coming online. In Shanghai, 1.6 million square meters of new prime office space will be completed this year, the highest level in five years. Foreign companies have been downsizing their office space, and domestic companies are moving to cheaper space to save money in a more challenging economy. For now, it seems that all the pressure on the commercial office space markets is negative and accelerating.
CALIFORNIA'S ENERGY DANGER: The northern half of California has three oil refineries that produce all the gas for its 15 million residents. The California Energy Commission (CEC) recently produced a report on California's energy situation. The premise of the report is that electric vehicles will soon make refineries obsolete, but the here-and-now faces some potential danger. There are no gasoline pipelines into California, and none of the adjacent states have refineries. In addition, California requires its own particular blend (California Reformulated Gasoline, or CaRFG). Refineries outside the state rarely produce it. One refinery represents 45% of refining capacity, and thus an outage would be potentially catastrophic. Moreover, these refineries generally, and currently, hold only about two weeks of reserves in inventory. Outages happen. These refineries were originally built in 1902, 1915, and 1968. The largest of the three sits on the Hayward Fault danger zone, ten miles from the fault line. The fault is 16 years overdue for a major earthquake. The CEC report provided 12 policy options. Let's hope they adopt effective policies to avoid major economic disruptions that would affect the entire country's economy.
SHARED EXPERIENCE: We visited Crystal Caverns with most of our grandchildren this weekend. This is Silas and me sharing the awe.

RIVERFRONT DINING: I love the ambience of a nice outdoor dining experience. This weekend, Deb and I went to the Wilmington waterfront, and we got to see some crew practice. This is the view from our table.

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
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(610) 628 4545
"The things that we love tell us what we are." Thomas Aquinas
"Look! The wages you failed to pay the workers who mowed your fields are crying out against you....You have lived on earth in luxury and self-indulgence." James 5:4-5
SOURCES:
THE OTHER INFLATION MEASURE: https://gritcap.io/p/alibabas-regulatory-overhaul
NVIDIA DISAPPOINTS?: https://gritcap.io/p/berkshire-breaks-trillion-barrier
CHINA OFFICE SPACE: https://www.zerohedge.com/markets/chinese-offices-emptier-now-during-peak-covid-lockdowns-economy-crumbles
AUGUST JOBS REPORT: https://finance.yahoo.com/news/us-jobs-data-help-fed-200000121.html
MEANWHILE, UP NORTH: https://finance.yahoo.com/news/us-jobs-data-help-fed-200000121.html
(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.
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