Hello, fiscal aficionados!! As we sail into the third week of September 2023, there’s a lot on the horizon. From housing to the Federal Reserve’s decisions, the economic seascape is bustling with activity. But don’t fret, I’m here to guide you through it all. Let’s dive into what’s coming up and what it means for you.
A Glimpse at the Economic Horizon
Recently, I’ve been closely monitoring several economic indicators, and I’d love to share my insights with you. First off, there’s some good news regarding recession odds. I’ve noticed a decrease in the 12-month recession odds by 5 percentage points, now standing at 15%. This is quite reassuring, especially when compared to the 60% median probability seen in the Bloomberg forecaster survey.
On the growth front, the Q3 GDP growth is tracking at a promising +3.2%. The Current Activity Indicator is holding steady at +0.8%, and the average for business survey trackers in August was 52.4. It’s an optimistic sign for our economy’s trajectory.
The labor market is showing signs of balance. The gap between available jobs and workers has been narrowing, currently at 2.2 million. This is a significant improvement from its peak of 5.7 million in March 2022. Additionally, initial jobless claims have reduced to 220k since last month, and the layoff rate is back to its pre-pandemic level of 1.2%.
Wage growth has been a topic of interest for many. While there was a slight dip in average hourly earnings growth in August, the monthly wage survey composite rose to 3.6%. The Indeed wage growth tracker, based on job ads, settled at 4.5% year-over-year in August.
Inflation is another area I’ve been watching closely. The Core PCE increased by a modest 0.14% in August. New-tenant rent growth was at a 3.4% annual rate, hinting that inflation in the housing sector might slow down a bit.
Lastly, the bond market’s stance has shifted. It’s no longer anticipating cuts in 2023 and expects fewer in 2024. By the end of 2024, market pricing for the federal funds rate is projected to rise by 46bp to 4.45%.
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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.
- NAHB Housing Index (September 18th): The NAHB homebuilder index might see a slight dip due to rising mortgage rates.
- Housing Starts and Building Permits (September 19th): Housing starts could experience a moderate dip, but the demand for new homes remains robust.
- FOMC Rate Decision (September 20th): The Federal Reserve’s updates will be crucial, even if no major changes are anticipated.
- Jobless Claims, Philly Fed Outlook, and Existing Home Sales (September 21st): These data points will be essential to gauge the economy’s health.
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
For the second quarter of 2023, year-over-year earnings are projected to decline by 2.9%. However, when we exclude the energy sector, the outlook is more positive, with an anticipated earnings growth of 3.6%. Impressively, out of the 499 S&P 500 companies that have disclosed their earnings for this quarter, a significant 78.8% surpassed analyst expectations. This performance is notably higher than the long-term average of 66.4% and the recent four-quarter average of 73.4%. In the upcoming week, starting September 18, we’ll be keeping an eye on five more S&P 500 companies slated to announce their quarterly results.
Aggregate Estimates and Revisions
- 23Q2 Y/Y earnings are expected to be -2.9%. Excluding the energy sector, the Y/Y earnings estimate is 3.6%.
- Of the 499 companies in the S&P 500 that have reported earnings to date for 23Q2, 78.8% have reported earnings above analyst estimates. This compares to a long-term average of 66.4% and prior four quarter average of 73.4%.
- During the week of September. 18, five S&P 500 companies are expected to report quarterly earnings.
Global Spotlight
The U.N. General Assembly: As the 78th U.N. General Assembly looms on the horizon from Sept. 18-26, the world watches a backdrop filled with widening global schisms. Foremost on the agenda is the Ukraine conflict, followed closely by pressing topics of economic development and climate change. A key highlight includes the anticipated side meetings among Israeli, Saudi, and U.S. delegates. While expectations are tempered regarding any significant diplomatic normalization between Israel and Saudi Arabia, it’s undeniable that the spotlight will shine on Saudi Crown Prince Mohammed bin Salman. His visit comes at a pivotal moment when U.S.-Saudi relations appear to be on the mend, after years of strain over human rights and energy concerns. However, with Brent crude currently valued over $90, the energy debate may well rise to prominence again. Meanwhile, sideline discussions between U.S. and EU officials concerning the escalating Sudan conflict remain crucial, even though previous international interventions have yet to yield substantial dialogue between the Sudanese factions.
Zelensky’s U.S. visit: Marking his first U.S. trip since December 2022, Ukrainian President Volodymyr Zelensky is on a mission. Following his General Assembly speech on Sept. 15, his Washington itinerary involves crucial dialogues with congressional heads, the U.S. president, and key stakeholders. At the core of his visit is a plea for stronger support as anxieties mount over the trajectory and pace of Ukraine’s counteroffensive strategy.
India’s Special Session of Parliament: Between Sept. 18-22, India’s Special Session of Parliament is set to spark animated debates over pivotal legislations like the Advocates; Press and Registration of Periodicals; Post Office; and Chief Election Commissioner and other Election Commissioners bills. Notably missing from the official roster are contentious subjects such as the Uniform Civil Code, the One Nation, One Election proposal, and the motion to rename India as “Bharat.” Yet, given their provocative nature, it wouldn’t be a surprise if these topics still make an appearance, potentially stirring intense opposition and raising the specter of civil disturbance.
First-ever all-ASEAN joint military drills: The Strait of Malacca will be abuzz from Sept. 18-23 as members of the Association of Southeast Asian Nations convene for their inaugural full-scale joint military exercise. Codenamed ASEX-01 Natuna, the non-combative drills emphasize disaster response and humanitarian endeavors. The original plan was to station these exercises within China’s contentious nine-dash line in the South China Sea. The shift in location, likely influenced by Cambodia, one of ASEAN’s staunchly pro-China members, may represent a missed chance for ASEAN to display a united front against China’s ambitious territorial aspirations. However, the very act of organizing these exercises manifests ASEAN’s ambition to showcase strategic unity amidst inherent divisions.
Stratfor.com
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