Markets Recap – Nov 2023

Hi Econ Students! Andy (2025) here. We’ve decided to start this blog page back up after a few years of inactivity. This series is meant to keep students updated about current events & developments in the economics/finance world. Since this is our first post in a while (and the first post in this series), it might be a bit longer than normal. Enjoy!

How Did We Get Here?

Consumer spending has been remarkably strong ever since the the Trump Admin. outlined a stimulus plan under the CARES act in 2020 in an effort to pull the United States out of its COVID-induced slump. The effects on This has led to a “rightward shift” in Aggregate Demand, pushing price levels higher. In an effort to curtail this inflation, the Fed has raised the discount rate in order to increase the cost of borrowing. The intended result? Inflation comes down (we achieve reasonable disinflation) and we achieve the so-called “soft landing” that investors want to see. However, a deeply-inverted yield curve begs the question: Are investors confident about the odds of a soft landing? 

Recent Macro Tailwinds:

Despite the 10Y treasury yield (risk-free rate) hitting a 5 handle (5.xx%) for the first time in more than 15 years, we have yet to see one, let alone two quarters where US GDP growth is negative (this is the formal definition of a recession). I would argue that the breakthroughs that we’ve been seeing in the Infotech (headways in LLM technologies pioneered by OpenAI and others) and Healthcare sectors (introduction of Obesity/Diabetes drugs such as Ozempic, Wegovy, and Zepbound/Mounjaro) have kept the US Economy afloat — and robustly growing too, as we’ve seen 3QFY23 GDP growth number come in at 4.9% (as per Bureau of Economic Analysis data).

Recent Macro Headwinds (and there are many):

Oh, gosh. The 10Y is very elevated, though, in recent weeks we have seen a bit of a pullback. Just this week, existing home sales for the month of October, a critical indicator of the health of the real estate market (which comprises ~10% of US GDP, if I recall correctly), came in lower than expected. Additionally, consumer sentiment continues to drop. Looming political risks related to the ongoing Israeli-Hamas & Russo-Ukrainian conflicts continue to pose a significant threat to global stability. The resumption of Student Loan Payments too, is a major threat to the US, as a credit crunch could shake the entire already-vulnerable financial system to its core. The question is not if discretionary spending will slump — but when, and to what magnitude. Too much, and the US is flung headfirst into a recession. Too little, and persistent inflation will leave the Fed scrambling to hike rates — or, at least keep them higher for longer.

Economic Events: What’s Coming Up?

This week (Week of 27 November 2023) will be a (very) interesting one. On Monday, we’ll get Existing Home Sales data for the month of October. On Tuesday, we’ll get Case-Shiller home price data (shoutout to my homeboy idol Robert Shiller, whose work inspires me greatly). Also on Tuesday, The Conference Board releases the November read on Consumer Confidence (for more info, see The CB’s CCI). On Wednesday, the Fed releases the Beige Book, which is essentially a biquarterly (8 per year) recap of how all 12 Fed districts have been doing. On Thursday (perhaps the most important day this week in terms of economic news), we’ll get last week’s initial jobless claim numbers, PCE and Core PCE data (the Fed’s preferred gauge of inflation), and we’ll also get Pending Home Sales. On Friday, Fed Chair Jerome Powell will speak, and we’ll also get ISM Manufacturing Data.

So that’s your economic events overview for this week. As the week continues, we’ll continue to keep you updated.

A Game of Predictions

It’s hard to tell where the domestic economy is going from here. Weakness abroad (in China, and across the Middle East) cause some global uncertainty. Additionally, geopolitical tensions create fear unilaterally. Despite these risks, the Fed has appeared to be doing a good job tamping down inflation (and we’ll see if this remains the case by Thursday). Harker Oeconomia’s team of analysts maintain a positive outlook on the possibility of a soft landing. However, as we see Consumer Spend start to take a hit, we remain ready to pivot our semi-bullish narrative. As we continue into 1QFY24, we remain cautious on the near-term wellbeing of the United States economy.

Legal Disclaimer:

This is not financial advice. Consult a financial professional for advice. Harker Oeconomia is not responsible for any financial losses incurred from the use of this service.

Leave a Reply

Your email address will not be published. Required fields are marked *