U.S. Economy
- 2nd quarter GDP was revised downward to a 2.1% annualized growth rate, a pace that still exceeds expectations as US economic growth remains resilient
- Federal Reserve policymakers maintained a hawkish stance at their annual Jackson Hole gathering, emphasizing their commitment to reaching the Fed’s 2.0% inflation target
- US inflation has moderated but remains well above the Fed’s goal; headline CPI inflation rose to 3.2% y/y in July – higher than June’s 3.0% but lower than expected – while the core CPI fell from 4.8% to 4.7% y/y
- Consumer confidence remains low given elevated inflation, higher interest rates, and forecasts for a recession, yet continued consumer spending growth has been a key support for the economy
- The labor market continues to show strength, but signs of softening have emerged
- Strong economic data has quieted recession calls in recent months, with more economists now calling for a ‘soft landing,’ however, economic headwinds are building, including the restart of student loan payments, dwindling excess savings, and the accumulating effects of higher interest rates
Non U.S. Economy
- Economic data from Europe has recently lagged that of the US as growth momentum there has slowed and inflation remains stubbornly high in some markets
- China’s post-reopening economy continues to struggle with falling exports, a weak property sector, and the economy experiencing deflation in August
- Central bank policy across economies has become more divergent as a variety of inflation and growth results play out globally
Market
- The global equity rally stalled in August as resilient economic data and hawkish Fed messaging raised expectations for ‘higher for longer’ interest rates
- Recent drivers of market volatility have faded with the US debt ceiling resolved and the banking crisis appearing to be in the rearview mirror
- As asynchronous growth plays out across regions, the risk of inflation and interest rate volatility could also rise
- Investors will have to remain committed to strategic investment programs, while also ensuring adequate portfolio liquidity and flexibility to reposition as the market environment unfolds
Disclosures
The views expressed herein are those of Asset Consulting Group (ACG). They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. This report was prepared by ACG for you at your request. Although the information presented herein has been obtained from and is based upon sources ACG believes to be reliable, no representation or warranty, express or implied, is made as to the accuracy or completeness of that information. Accordingly, ACG does not itself endorse or guarantee, and does not itself assume liability whatsoever for, the accuracy or reliability of any third party data or the financial information contained herein.
Certain information herein constitutes forward-looking statements, which can be identified by the use of terms such as “may”, “will”, “expect”, “anticipate”, “project”, “estimate”, or any variations thereof. As a result of various uncertainties and actual events, including those discussed herein, actual results or performance of a particular investment strategy may differ materially from those reflected or contemplated in such forward-looking statements. As a result, you should not rely on such forward-looking statements in making investment decisions. ACG has no duty to update or amend such forward-looking statements. The information presented herein is for informational purposes only and is not intended as an offer to sell or the solicitation of an offer to purchase a security.
Please be aware that there are inherent limitations to all financial models, including Monte Carlo Simulations. Monte Carlo Simulations are a tool used to analyze a range of possible outcomes and assist in making educated asset allocation decisions. Monte Carlo Simulations cannot predict the future or eliminate investment risk. The output of the Monte Carlo Simulation is based on ACG’s capital market assumptions that are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. Capital market assumptions based on other models or different estimates may yield different results. ACG expressly disclaims any responsibility for (i) the accuracy of the simulated probability distributions or the assumptions used in deriving the probability distributions,(ii) any errors or omissions in computing or disseminating the probability distributions and (iii) and any reliance on or uses to which the probability distributions are put.
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