October 27th, 2023
As of about mid-day today, equity markets were continuing to struggle during an October that has seen three weeks of declines in US indices.  For the month thus far, the Dow, S&P and Nasdaq 100 were down between (2.5%) and (3.5%). The Russell 2000 index which represents small capitalization companies is down (7.5%) for the same period.  The government bond index is down around (1%) as well.  I think you see a theme developing…
Since the end of July, the drawdown has been pronounced, with the Nasdaq entering into “correction territory” (i.e., a fall of 10% or more) and the S&P 500 approaching that mark as well.  Many factors at play, including earnings season, rising yields on bonds, the middle east conflict and the drama around a selection for Speaker of the House in the U.S.
On a planning note, I encourage you to listen to the Ted Talk linked below - especially if we have been talking about estate planning with you recently.
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If something cannot go on forever, it will stop.
- Herbert Stein, Economist

Building a bit on our recent about how “R” must be greater than “E” (Market Update - October 6th), this just out with the data through September 30th.  The red line is the amount the government spent and the green below it is the money coming in from taxes, etc.  The white space represents the deficits.
To Herbert Stein's point in the quote above - deficits may continue until there is no longer an appetite for the debt that they create.  We think that this (higher deficits and debt levels) will have potentially significant implications for US interest rates.
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Economists surveyed ahead of this week's GDP report had coalesced around a consensus view of 0.6% GDP growth for the 3rd quarter of 2023.  Quite  the miss! You would have to move the decimal point one place to the right to even be in the ball park of the actual number - 4.9%.
The drivers in this quarter's growth after inflation were consumer spending on services and goods, while inventory rebuilding by companies rounded up the last three.  We pointed out last week that inventory levels had been falling rapidly and a rebound was likely.  
We see a slowing in real GDP growth over the coming quarters.  The magnitude of the slowing is difficult to project, but the torrid pace of growth in Q3:2023 will be hard to replicate.
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Continuing claims for insured unemployment measures the number of people on the unemployment benefit rolls for successive weeks.  The last two or three readings have shown an increase that, albeit modest, starts to potentially form a signal that jobs may not be so easily found at the moment.
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While continuing claims for unemployment seem to be rising, initial claims continue to surprise to the positive (or negative, depending on your point of view).  We are now back to late 2022 levels of initial claims and the moving average is in a clear downward slope.
Just because I know you aren't tired of my saying it: we think the labor market is key to whether we have a recession and how deep that recession will be.
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  • The House gets back to work
  • Middle East conflict
  • Earnings Season continued
  • The Secret of America's Economic Success - Krugman (NY Times)
  • Welcome to the Age of the Hermit Consumer (The Economist)
  • A New Way to Think About Inheritance (Ted Talk)

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