Welcome to “The Week Ahead,” where we dive into the key economic indicators that are shaping the markets and influencing investment decisions. As summer winds down, the U.S. economy is heating up, and the coming week promises to be a pivotal one. From the housing market’s delicate dance between existing and new home sales to the Federal Reserve’s strategic moves, there’s no shortage of action on the horizon.
On Tuesday, all eyes will be on existing home sales, with July’s numbers expected to mirror June’s performance. But what’s behind the lack of rebound in this sector? High mortgage rates and limited inventory are playing their part, and we’ll explore what this means for potential homebuyers.
Then, on Wednesday, we shift our focus to new home sales. Here, optimism reigns, with an anticipated bounce-back in July. But affordability challenges loom large, casting a complex shadow over the housing market.
Grab a cup of coffee and settle in. Whether you’re an investor, economist, or just curious about the economic landscape, “The Week Ahead” has something for you. Stay with us as we navigate the twists and turns of an economy in transition and uncover the trends that are defining the future. It’s a week you won’t want to miss!
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The Hot Zones this Week
Each week there are zones where trading can get wild. I call these the hot zones.
Existing Home Sales
Mark your calendars for August 22, as the U.S. housing market braces for the latest existing home sales data. Analysts are predicting a steady course, with July’s figures expected to hover around June’s 4.15 million mark (seasonally adjusted annual rate). The existing home market hasn’t seen the same rebound as new home sales, and the culprit appears to be high mortgage rates. These rates are creating a lock-in effect, limiting supply and nudging potential homebuyers towards the new home market. It’s a trend that’s keeping everyone on their toes, and August 22 promises to shed more light on this evolving landscape.
New Home Sales
Just a day later, on August 23, the spotlight shifts to new home sales. Here, optimism is in the air, with July’s numbers expected to climb to 715,000 (seasonally adjusted annual rate), partially reversing June’s dip to 697,000. Unlike their existing counterparts, new home sales are showing resilience, thanks in part to limited inventory in the existing homes market. But it’s not all smooth sailing. Affordability challenges, spurred by rising home prices and towering mortgage rates, continue to cast a shadow over demand.
These back-to-back announcements are more than mere statistics; they’re a pulse check on a housing market at a crossroads. With affordability, mortgage rates, and inventory all in play, the week ahead promises to be a telling one for economists, investors, and homebuyers alike. Stay tuned!
Macro Market
Growth
The U.S. economy is poised for a soft landing, with growth expected to dip below trend in 2024 but remain in positive territory. Forecasts are optimistic, with GDP growth pegged at 2.0% for 2023, 0.7% in 2024, and 1.8% in 2025. These figures mark an upward revision from previous estimates. A recent surge in retail sales and industrial production has also fueled optimism, boosting the third-quarter GDP tracker from 2.0% to 2.7%.
Federal Reserve
The Federal Reserve is nearing the end of its hiking cycle, according to the July FOMC minutes. The tone is balanced, with some participants noting that risks have become more evenly distributed. Concerns are emerging about credit tightening and financial conditions, with specific worries related to banks and insurers stemming from commercial real estate weaknesses. The possibility of extended quantitative tightening (QT) is on the table, and experts are eyeing one more 25bp rate hike in November, followed by the first rate cut in June 2024.
Inflation
Inflation expectations are shifting, with PCE inflation now projected to fall to 2.0% year-over-year in the second half of 2025, a delay of two quarters from previous forecasts. The outlook for the four-quarter change in core PCE inflation stands at 3.7% in 2023, 2.8% in 2024, and 2.2% in 2025. Recent data also hints at the risk of a fresh inflationary spike, driven by robust aggregate demand.
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Week’s Numbers
Review Last week’s numbers here.
Earnings
Source I/B/E/S data from Refinitiv
- The year-over-year (Y/Y) earnings for 23Q2 are projected to be -3.4%. However, when the energy sector is excluded, the Y/Y earnings estimate improves to 3.0%.
- Out of the 472 companies in the S&P 500 that have reported earnings for 23Q2 so far, an impressive 79.0% have surpassed analyst estimates. This figure stands out when compared to the long-term average of 66.4% and the prior four-quarter average of 73.4%.
- The week of August 21 will be noteworthy, with 12 S&P 500 companies expected to report their quarterly earnings.
These data points highlight a mixed picture for 23Q2, with overall earnings expected to decline, but a significant majority of companies beating expectations. The exclusion of the energy sector paints a more positive picture, and the upcoming week’s earnings reports from 12 key S&P 500 companies will be closely watched for further insights.
Global Spotlight
South Africa to Host BRICS Summit
South Africa will host the 15th BRICS Summit from August 22-24, focusing on potential expansion of the group’s membership. China is advocating for new members to increase economic and political influence, but India and Brazil are skeptical of the expansion plans. Other key topics include the creation of a global payments system and investment in Africa.
Zimbabwe’s Contentious General Elections
Zimbabwe’s general elections are set for August 23, with President Emmerson Mnangagwa seeking reelection against opposition leader Nelson Chamisa. Polls suggest a close race, but tactics like intimidation and violence may be used by the ruling party to secure victory. The outcome could lead to continued economic stagnation and international investment avoidance.
Elections in Guatemala and Ecuador
Guatemala will hold a presidential runoff on August 20 between former first lady Sandra Torres and leftist lawmaker Bernardo Arevalo. Ecuador will simultaneously conduct general elections and two environmentally-focused referendums. Political unrest and potential U.S. sanctions may follow in Guatemala, while Ecuador’s referendums could impact natural resource industries.
India and Russia’s Lunar Missions
Russia and India are planning soft landings at the lunar south pole on August 21 and 23 respectively, aiming to explore an area believed to be rich in water resources. These missions mark significant steps in lunar exploration and mining, with both nations seeking to demonstrate their soft-landing capabilities. Success would boost their standing in the global space race.
Stratfor.com
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