Over the past six weeks, I've grown increasingly concerned about the economy. A sharp slowdown in hiring, major annual revisions to labor data, and last week’s spike in jobless claims had all pointed to potential trouble ahead. However, this week's economic reports offer a different picture—suggesting continued resilience in both the labor market and consumer activity.
Retail sales came in stronger than expected, rising 0.6% for the month. The “control group” (which feeds directly into GDP calculations) performed even better. Gains were broad-based across categories, with a particularly notable jump in online sales.
Jobless claims also provided some relief, dropping by 33,000 from the previous week—returning to what would be considered a very healthy level. While hiring is clearly slowing, the supply of available workers has also decreased, and we’ve yet to see significant layoffs. That could change, especially if companies start feeling the pressure from rising tariff-related costs.
Markets were volatile during Fed Chair Powell’s press conference, but stocks ultimately finished close to flat for the day. Thursday saw more pronounced gains, but the optimism may be premature.
The Fed cut rates by 25 basis points, bringing the target range down to 4.00–4.25%. One Fed member—the newest addition to the committee—called for a 50 basis point cut and projected a total of five cuts by year-end. That forecast raises some questions about the future independence of the Federal Reserve from political influence. Beyond that, the median “dot plot” now suggests two additional cuts before the end of the year.
What’s particularly interesting is that the Fed simultaneously revised both inflation and growth projections upward. Powell acknowledged risks to both of the Fed's mandates—price stability and full employment—but indicated that concerns about growth may be taking precedence for now.
While the market continues to push into all-time highs, I remain skeptical about the sustainability of this rally. Current valuations are stretched, and we’re lacking clear, positive catalysts on the horizon.
📅 Looking Ahead: Key Economic Data Releases
Next week’s economic calendar is lighter, but still includes several important indicators. The main highlight will be the release of the Fed’s preferred inflation measure—the PCE Deflator. Core PCE is expected to moderate on a month-over-month basis, but still rise to 3% on an annualized basis.
Wednesday:
Building Permits
New Home Sales
Thursday:
Durable Goods Orders
Q2 Final GDP
Existing Home Sales
Friday:
PCE Deflator
Personal Consumption Expenditures
Personal Income
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📌 Disclaimer:
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts may not develop as predicted.